The UK government's Autumn Budget has confirmed that company car tax rates will rise across the board in April 2030, with electric vehicles facing the steepest increases and plug-in hybrids losing the range-based incentives they once enjoyed.
For fleet operators and company car drivers, the changes mean Benefit-in-Kind (BiK) bills will climb sharply, and industry specialists say the Chancellor missed a chance to make used electric company cars more affordable.
How the new BiK rates break down
Company car drivers pay BiK on the perk of using a vehicle for private journeys, taxed at their income rate, typically 20% or 40%. Since 2002 the taxable value has been calculated as a percentage of list price across 27 bands ranging from 4% to 37%, with higher prices and CO2 emissions attracting higher charges.
The Budget confirmed all rates will rise by one percentage point in April 2030, but electric vehicles face the steepest climb: from 4% in 2026/27 to 10% in 2030/31. For a 20% taxpayer in a Volkswagen ID 3 Style with the 79kWh battery, that means monthly BiK bills rising from £27 to £67.
Plug-in hybrids fare worse. The 2024 Budget removed incentives for vehicles emitting 1-50g/km CO2 to offer a longer electric range, placing them all into a single 18% band. A Volkswagen Golf eHybrid with an 88-mile electric range will rise from 7% BiK today to 20% in 2030/31, with monthly BiK tripling from £44 to £133.
Three quarters of company car drivers currently pay BiK on a vehicle under 50g/km, according to the latest HMRC data. That concentration of drivers in the low-emission bands means the rate rises will touch a large share of the fleet market, not just a niche group of early EV adopters.
Fleet specialists say the Budget falls short
Dave Bushnell, director of consultancy and strategy at Fleet Operations, welcomed the announcement as a step towards restoring confidence but said it could go further.
"We're disappointed that the Chancellor hasn't taken this opportunity to make used electric company cars more affordable," he said. "Drivers are still taxed on a vehicle's original list price, even when it has depreciated significantly. Changing this could have opened up electric cars to more employees through salary sacrifice schemes, while also helping to boost demand in the second-hand market and support residual values".
The used-car point is the sharpest criticism in the industry response. Because BiK is pinned to original list price rather than current value, a depreciated EV can carry a tax bill out of proportion to what it is actually worth, which weakens the case for salary sacrifice schemes built around second-hand electric cars.
Capital allowances and mileage rates also change
The Budget confirmed changes to Capital Allowances, which let businesses offset investment costs against gross profits and reduce corporation tax. For cars the system is CO2-based: businesses can offset 100% of the cost of zero-emission cars (electric and hydrogen), falling to 14% for vehicles emitting 1-50g/km and 6% for anything above that threshold.
The 14% main rate was cut from 18% in April 2026 and will fall to 12% in April 2027, effectively reducing the tax breaks for businesses buying plug-in hybrids in that bracket. Tax breaks for leased cars are unchanged, with businesses able to offset 100% of monthly rental costs for vehicles emitting 50g/km CO2 or less.
Businesses running a grey fleet will also face rising costs. HMRC's approved mileage rate lets employees claim back the cost of driving their own car for work, covering fuel, depreciation, wear and tear and other operating costs. The initial rate was temporarily raised from 45p to 55p per mile in June and will now become permanent, while the higher-mileage rate rises from 25p to 35p. Those are the first changes in 15 years and are expected to support three million employees who use their own car for work, according to the Treasury.
Jon Lawes, managing director at Novuna Vehicle Solutions, said: "With manufacturers facing intense global competition and pressure on residual values, the priority must be a transition that customers can afford and businesses can plan for. Greater certainty on EV taxation, charging costs and future sales targets will be critical to sustaining demand, protecting used-car values and supporting long-term investment in the UK motor industry".
The mileage rate increase is the one measure in the Budget that clearly eases costs for drivers, but it applies to those using their own cars for work rather than to company car drivers facing higher BiK. For fleets weighing up electric options, the combined effect is a steeper tax trajectory for EVs and PHEVs alongside narrower capital allowance relief for plug-in hybrids.
