As the New Tax Year day 6th April 2025 arrives, so does a plethora of changes to taxation.
For those who have Electric Cars through employer schemes, the company car tax is increasing by 50% today.
Whether provided as a normal company car or via a car purchase scheme, EV scheme, Salary Sacrifice, or other provision of electric car scheme provided via the employer, this increase applies to you. if you have paid for your car on pay that has not had tax and National Insurance deducted first, then you have a company car no matter who provides the vehicle. You have legally not paid a penny and there is no capital contribution by you for the vehicle.
If you have bought an electric car external to any employer schemes, ie you have bought the car out of your earnings after tax and NI has already been deducted, then this change does not apply to you.
So the company car tax for a full EV increases by 1 percentage point from the prior 2% charge to the new +50% increasing making it 3%.
So if your EV car list price was £38,000 and had accessories of £2,000, then the overall price to consider would be £40,000.
The 2024/2025 company car tax amount would have been £40,000 x 2% equals a tax charge of £800 with an employer Class 1A employer liability of £110.40 paid via P11Db.
The new 2025/2026 company car tax amount is now £40,000 x 3% equals a +£400 tax charge making £1,200 with a Class 1A employer liability of £180 as the employer NIC percentage increases to 15%.
Increases are to apply over the coming tax years:
- 2024.2025 – EV Company Car tax rate = 2%
- 2025/2026 – EV Company Car tax rate = 3%
- 2026/2027 – EV Company Car tax rate = 4%
- 2027/2028 – EV Company Car tax rate – 5%
- 2028/2029 – EV Company Car tax rate = 7%
- 2029/2030 – EV Company Car tax rate = 9%
Is it worth having a company provided EV using these schemes?
Despite these increases, electric vehicles maintain a significant tax advantage over conventional petrol and diesel cars, which typically face company car tax rates starting at 25 per cent or higher.
Any amount of earnings reduced to join a salary sacrifice scheme would probably been taxed at a rate of at least 20% and savings for higher and additional tax rate payers at 40% or 45% and fir those in Scotland even more.
What sometimes needs to be considered is the number of years over which an EV scheme operates and the agreed reduction amount.
What about hybrids and other low emission vehicles?
Other electric hybrids and vehicles with low emissions also find that their company car tax rates increase by one percentage point from their prior level. Increases to these rates are proposed over the coming tax years in alignment with EVs.
Vehicles with emissions of 1-50g/km will see their company car tax tate jump:
- 2028/2029 – hybrid Company Car tax rate = 18%
- 2029/2030 – hybrid Company Car tax rate = 19%
regardless of their electric range capability.
This increases from the prior year rates which ranged from 5% to 17% depending on electric mileage range.
What about other company cars
The maximum company car tax rate will increase from 37% to 38% in 2028/2029 and to 39% in 2029/2030.
This applies to vehicles with CO2 emissions of 160g/km or higher, which currently face the maximum rate.
Diesel vehicles not meeting the emission standards continue to incur an added 4% surcharge, up to the maximum rate.
The company car tax rates
PAYadvice.UK 6/4/2025