Company Car Tax: October 2024
Our updated guide to Company Car Tax for fleet decision-makers following the October 2024 Budget
Introduction
The Budget on 30 October 2024 headlined with announcements on a continued freeze on fuel duty until 22 March 2026, Benefit-in-Kind (BIK) tax rates for 2028/29 and 2029/30 and a rise in National Insurance Contributions (NICs) for employers.
From 1 April 2025, first-year rates for Vehicle Excise Duty (VED) will increase considerably. Standard rates for VED will also increase in line with the Retail Price Index (RPI). All electric vehicles (EVs) will be subject to VED from 1 April 2025. The Expensive Car Supplement will also apply to EVs registered from 1 April 2025.
For now, BIK tax percentages for all company cars are fixed until April 2025, with the electric vehicle rate set at 2%. From that date, tax percentages for EVs will increase, with 1% increments applying annually until 2027/28. Rates for all other vehicle bands also rise – by one percentage point in 2025/26 up to 37%, where they are fixed until 2027/28. In 2028/29, BIK rates for zero-emission cars rise by two percentage points while rates for all cars emitting 1-50g/km are elevated to 18%. A 1% rise for all other cars in 2028/29 and 2029/30 takes the percentage rate to 39% for cars with CO2 emissions of 160g/km or over.
Car and Van Fuel Benefit Charges were also announced, taking effect from 6 April 2025, although subject to an RPI-linked rise in April 2025.
An investment of £1.6 billion was also pledged by the Chancellor, Rachel Reeves, to tackle potholes on UK roads, an increase of £500 million over 2024/25.
Capital allowance ‘full expensing’, or 100% first-year tax relief, on qualifying plant and machinery expenditure, including vans and EV charge points (but excluding cars), is extended by a year. Initially introduced for three years from 2023/24, the Budget stated this could be extended to include leased assets when fiscal conditions allow.
This guide to Company Car Tax offers explanations and guidance on developments following the October 2024 Budget.
Vehicle Excise Duty
(VED) rates for 2024/25 are shown (right). Cars priced over £40,000 with zero emissions of CO2 when driving are exempt from the additional rate until 31 March 2025.
The following announcements were made in the Budget:
- From 1 April 2025, EVs and cars with zero emissions will pay the lowest first-year rate at £10 in 2025/26 and an annual VED of £195. New EVs over £40,000 first registered from 1 April 2025 will also become liable for the Expensive Car Supplement.
- First-year rates for cars emitting 1-50 g/km of CO2, including hybrid cars, will increase to £110 for 2025/26.
- First-year rates for cars emitting 51-75 g/km of CO2, including hybrid cars, will increase to £130 for 2025/26.
- First-year rates for all cars emitting 76 g/km of CO2 and above will double from their current level for 2025/26.
- Zero emission vans will move to the rate for petrol and diesel light goods vehicles
- £335 a year for most vans in 2024/25, rising to £345 in 2025/26.
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Company Car Tax
Company car BIK tax is based on a car’s P11D price and CO2 emissions, with the BIK percentage rates for all company cars shown in the table (right).
From 1 April 2025, BIK tax rates for cars with zero emissions of CO2 when driving, for example, EVs, will rise by one percentage point a year until 2027/28. Rates for all other BIK bands will rise by 1% increments in 2025/26 and are then fixed in 2026/27 and 2027/28.
In 2028/29 and 2029/30, rates for zero-emission cars increase to 7% and 9% respectively. For all cars with CO2 emissions of between 1-50g/km, rates rise to 18% and 19% respectively, with 1% increments for cars with CO2 emissions of 51g/km and above. For non-RDE2 diesels, a 4% tax charge applies.
Example: a 100% electric BMW iX1 eDrive20 M Sport has a P11D price of £50.900 and CO2 emissions of 0g/km. Its BIK band for 2024/2025 is 2%. £50,900 x 2% gives a taxable value of £1,018 and yearly BIK tax of £204 (£17/month) for a 20% taxpayer, or £407 a year (£34/month) at 40%.
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Capital Allowances
Company cars bought outright are eligible for write-down allowances, where capital outlay can be offset against tax. The allowance threshold between the 18% main and 6% special rates is based on CO2 emissions, set at 50g/km in 2024/25. For cars with CO2 emissions of 1-50g/km, the allowance is 18% a year, while for cars with CO2 emissions of 51g/km or more it is 6%.
A 100% first-year capital allowance applies until 31 March 2026 for Corporation Tax and 5 April 2026 for Income Tax to cars with zero emissions of CO2 while driving, although leasing companies are unable to claim the allowance.
Full expensing
The Budget announced a one-year extension to capital allowances based on full expensing to 31 March 2027, following the success of the 130% super deduction introduced in 2021.
Full expensing enables businesses to deduct 100% of outright purchase expenditure from their profits before tax on new main rate equipment items – such as electric charging equipment, vans and trucks (provided the Plug-in Grant has not also been claimed) but excluding company cars. The Government will explore extending full expensing to assets bought for leasing or hiring when fiscal conditions allow.
Lease rental restriction
Lease rentals on company cars can be offset against tax, with the threshold set at 50g/km of CO2. New cars with CO2 emissions of 50g/ km or less are eligible for 100% of payments to be offset, while only 85% is claimable for those with CO2 emissions of 51g/km or more.
Fuel Allowances
The private fuel benefit
BIK tax is payable by drivers receiving employer-provided fuel for private mileage in a company car. To calculate it, the Fuel Benefit Charge (FBC) is used – £27,800 in 2024/25, rising to £28,200 from 6 April 2025.
Calculating tax due on employer-provided fuel for private use
A new BMW X5 xDrive 30d M Sport has WLTP-derived CO2 emissions of 191g/km giving a BIK tax percentage of 37% in 2024/25.
Its Worldwide Harmonised Light Vehicle Test Procedure (WLTP) combined fuel consumption is 38.7mpg, (7.3 litres/100km). £27,800 x 37% gives a taxable value of £10,286. Multiplying by the driver’s income tax rate derives annual tax of £10,286 x 20% = £2,058, or £10,286 x 40% = £4,114. With the average price of diesel at £6.36/gal or £1.40/litre (October 2024), £2,058 will buy around 323 gallons (1,468 litres) for a 20% taxpayer. For a 40% taxpayer, it is around 647 gallons (2,941 litres).
Multiplying each by the BMW X5 xDrive 30d M Sport’s combined fuel consumption of 38.7mpg gives 12,500 miles for a 20% taxpayer, or 25,039 miles for a 40% taxpayer – the minimum private mileage you need to cover to make the private fuel benefit worthwhile.
If your private mileage is less than the calculated figure, paying for the fuel yourself will cost less than the tax. If it is greater, you are better off paying the tax. As electricity is not a fuel it has no scale charge, meaning drivers of 100% electric cars are exempt from fuel benefit tax.
Business mileage, private car
HMRC Approved Mileage Allowance Payments (AMAPs) – the tax and NIC-free amounts claimable by a driver using his/her own car for business mileage – are shown (below) for 2024/25.
Class 1A National Insurance Contributions
The Budget announced a 1.2% rise in employers’ National Insurance Contributions from 6 April 2025. In 2024/25, class 1A NICs are payable at 13.8% of taxable value by the employer on the company car benefit and employer-provided private fuel. From 6 April 2025, the rate rises to 15.0%. As electricity is not classed as a fuel, there is no scale charge and 100% electric cars are NIC-exempt in 2024/25.
For plug-in hybrid cars, the zero-emission mileage the car can travel affects its taxable value and the NIC payable in the same way as for BIK tax. However, the Budget announced that. in April 2028, the mileage-related scale is abolished and all cars with CO2 emissions of 1-50g/km will have their taxable value based on a rate of 18%, rising to 19% in 2029/30.
Class 1A NIC – petrol, diesel and plug-in hybrid cars in 2024/25:
A BMW 330e M Sport Plug-in Hybrid, with a P11D price of £48,180 and WLTP CO2 emissions of 19g/km, has a zero-emission range of 62 miles, giving a BIK tax percentage of 8% in 2024/25. £48,180 x 8% gives a taxable value of £3,854. Multiplying by 13.8% derives annual Class 1A NIC of £532.
Commercial Vehicles
Double Cab Pickup Trucks
The Budget announced that, from 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, Double Cab Pickup Trucks (DCPUs) will be treated as cars for the purposes of capital allowances, BIK and some deductions from business profits. The existing capital allowance treatment will apply to those who purchase DCPUs before April 2025.
Transitional BIK arrangements will apply for employers that have purchased, leased or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry or 5 April 2029. The Government will uprate the Van Benefit Charge and Car and Van Fuel Benefit Charges by CPI from 6 April 2025.
Company-owned vans: BIK tax
Zero-emission vans are exempt from BIK tax until 31 March 2025. Until 31 March 2025, the Van Benefit Charge (VBC) for those driving a company van for private use is set at £3,960. The VBC for fuel for private use is set at an extra £757. The monthly tax is shown below.
Company-owned vans: Class 1A NIC
Zero-emission vans are exempt from annual Class 1A National Insurance Contributions in 2024/25. For other vans, NICs are based on the Van Benefit Charge – £3,960 in 2024/25. The amounts due are calculated by multiplying the VBC by 13.8%, with the rates shown below.
Company-owned vans: Vehicle Excise Duty
VED rates for petrol and diesel vans in 2024/25 are shown below – £335 in 2024/25 for most vans registered after 1 March 2001. Zero emission vans will move to the VED flat rate for petrol and diesel vans from 1 April 2025.
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Plug-in Grants
The Government Plug-in Car Grant of up to £2,500 is available only to wheelchair accessible vehicles priced up to £35,000* with zero CO2 tailpipe emissions and a zero-emission range of at least 70 miles.
Plug-in Grant-eligible motorcycles
Motorcycles priced up to £10,000, with zero CO2 tailpipe emissions and a range of at least 31 miles, are eligible for a maximum grant of £500.
Plug-in Grant-eligible mopeds or scooters
Mopeds or scooters costing up to £10,000, with zero CO2 tailpipe emissions and a range of at least 19 miles are eligible for a maximum grant of £150.
Plug-in Van Grant
The Budget announced the Plug-in Van and Truck Grant is extended into 2025/26.
On 1 April 2022, the threshold for the small truck grant of up to £16,000 increased from 3.5t to 4.25t gross vehicle weight (GVW), and vans up to 4.25t are eligible for a grant of £5,000.
Vans: Vans under 2.5t GVW with CO2 emissions of 50g/km or less and a zero-emission range of at least 60 miles receive a grant of up to £2,500. Vans of 2.5-4.25t GVW receive a grant of up to £5,000. Grants are limited to 1,000 per customer per year and exclude leasing companies. Click here for more information.
For N2 commercial vehicles of 4.25-12.0t GVW, CO2 emissions of at least 50% less than the equivalent conventional Euro VI vehicle and the same load capacity, and which can travel at least 60 miles with zero emissions, the grant is up to £16,000.
Workplace Charging Scheme (WPC):
The WPC reduces the cost of a new workplace charging station by 75%, capped at £350 per socket
Electric Vehicle Chargepoint Grant:
The EV Chargepoint Grant has replaced the Electric Vehicle Homecharge Scheme (EVHS) and is open to people living in flats (including those with mortgages) and rental accommodation. Those in single-unit properties such as bungalows and detached, semi-detached or terraced housing are no longer eligible for the grant. Click here for further details.
*The definition of recommended retail price includes VAT (including VAT reclaimable by a business) vehicle manufacturer or dealer’s mandatory extras including delivery charges or administration fees, the battery cost (including where the battery is leased), any non-standard option fitted by the manufacturer or dealer affecting the capacity of the battery, drivetrain configuration or maximum net power, and excludes any non-standard option fitted by the manufacturer or dealer which does not affect the capacity of the battery, drivetrain configuration or maximum net power, modifications such as ‘police packs’, ambulance/fire engine modifications, modifications for disabled users, including WAV conversions, warranty/insurance and service packages etc, first registration fee and cost of first-year VED and any discounts (including rebates). UK model specifications may vary.
London ULEZ and Congestion Charge
The London Ultra Low Emission Zone (ULEZ) was extended on 29 August 2023 and now operates in all Boroughs 24 hours a day, seven days a week, except Christmas Day. It excludes the M25 motorway.
If your vehicle doesn’t meet ULEZ emissions standards and isn’t exempt, you need to pay a £12.50 daily charge to drive in the zone. This applies to cars, motorcycles, vans and specialist vehicles up to 3.5 tonnes, and minibuses up to five tonnes.
Lorries, vans or specialist heavy vehicles over 3.5 tonnes and buses, minibuses and coaches over 5 tonnes do not pay the ULEZ charge but are liable for the Low Emission Zone (LEZ) emissions charge if they do not meet LEZ standards. Click here for more details on the LEZ.
Non-UK registered vehicles must also meet ULEZ emissions standards or pay the daily charge to drive within the zone and must be registered with EPC PLC even if they meet the emissions standards.
London ULEZ and Congestion Charge
London Ultra Low Emission Zone (ULEZ)
The daily ULEZ charge of £12.50 is enforced based on the declared emissions of the vehicle rather than its age. It also applies to residents of the Zone. The Zone was expanded on 29 August 2023 to include all London Boroughs but excludes the M25 motorway.
There is a penalty charge of £180, reduced to £90 if paid within 14 days. If you drive within the ULEZ area across two days, for example before midnight and after midnight, you need to pay two daily charges.
ULEZ minimum emission standards
Petrol vehicles: Euro 4 (NOx)
Diesel vehicles: Euro 6 (NOx and PM)
Petrol cars that meet ULEZ standards are generally those first registered as new with the DVLA after 2005, although cars that meet the standards have been available since 2001.
Diesel cars that meet ULEZ standards are generally those first registered with the DVLA as new after September 2015 For further information on the ULEZ, click here.
London Congestion Charge
The London Congestion Charge is a £15 daily charge if you drive into the Congestion Charge zone between 07:00-18:00 Monday-Friday and 12:00-18:00 on Saturday-Sunday and bank holidays. There is no charge between Christmas Day and New Year’s Day.
To check your car’s ULEZ and Congestion Charge compliance go to https://tfl.gov.uk /modes/driving/check-your-vehicle/