Company Cars and Vans
The government detailed important updates in the recent Autumn Budget on taxing company cars and vans, with a particular focus on electric vehicles and low-emission options. Whether you’re considering a new company car or an electric upgrade, we’ve got the latest information for you.
Company Cars
When an employer provides a company car for private use, it becomes a taxable benefit. The tax amount depends on:
- The car’s original market value, including optional accessories.
- The amount of CO₂ emissions, higher emissions leading to higher tax rates.
- The type of fuel the car uses, diesel vehicles not meeting the RDE2 standard and therefore incurring a 4% surcharge.
To calculate the taxable benefit, you multiply the car’s list price by an ‘appropriate percentage’ based on its CO₂ emissions.
A car emitting 100g/km CO₂ may have an appropriate percentage of 25%. If the list price is £30,000, the taxable benefit would be £7,500 (£30,000 x 25%).
Electric and Low-Emission Vehicles
The government taxes Electric Vehicles (EVs) at 2% of their list price for the 2024/25 tax year. This means a £30,000 EV results in a taxable benefit of just £600. Additionally, there is no Fuel Benefit Charge for electricity provided for private use of an electric company car.
Fuel Benefit Charge
If an employer covers fuel costs for private journeys, an additional tax applies. To calculate the charge, you multiply the car’s appropriate percentage by a fixed value that HMRC sets annually. For the 2024/25 tax year, this value is £27,800.
Using our earlier example, with a 25% appropriate percentage, the Fuel Benefit Charge would be £6,950 (£27,800 x 25%).
Company Vans
When an employer provides a company van for private use, it also becomes a taxable benefit. For the 2024/25 tax year, the taxable benefit is £3,960. If fuel is also provided for private journeys, an additional charge of £757 applies.
However, if the van is only used for business purposes or insignificant private use (commuting), then no tax charge applies.
Autumn Budget – October 2024
In the Autumn Budget 2024, the government announced future increases in company car tax rates:
- For zero-emission vehicles, the appropriate percentage will rise by 2% per year for the 2028/29 and 2029/30 tax years.
- For other vehicles, the rates will rise by 1% per year during the same period.
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