Company car tax rises from April 2026 include EVs

Sara White, Editor, Business & Accountancy Daily. Croner

Company car tax bands increase across the board including electric vehicles going to 4%, up to maximum 37% for highest emitting vehicles, affecting over 700,000 employees.

Heralding a new tax year, there are increases for most vehicle classes in 2026-27. The electric vehicle (EV) rate goes up from 3% to 4%, adding to the tax costs for employees with these company cars. Standard petrol and diesel rates are also increasing by one percentage point each, depending on emissions.

The cash equivalent for a company car is calculated as a percentage of the car’s list price. And this price means the full published price of the car, inclusive of VAT, optional extras and accessories when it was first registered. The price actually paid by the employer is not relevant. This is the P11D value for HMRC purposes. For the employee, the benefit in kind (BIK) charge is calculated based on personal tax band.

For 2026-27, company car tax bands for electric vehicles are increasing to 4%, while low-emission cars (1-50g/km) range from 4% to 20%, and higher emission vehicles face rates from 21% to 37%.

From 6 April 2026, benefit charge percentages for most cars with CO2 emissions below 75g/km will be increased by 1%, subject to a maximum of 5% for fully electric cars with zero CO2 emissions, and 21% for cars with CO2 emissions below 75g/km. Benefit charge percentages for most cars with CO2 emissions at or above 75g/km will be frozen in 2026-27.

The highest rates apply to petrol cars with 155 and over CO2 emissions (g/km), and diesel cars over 135g/km, both charged at 37%.

For cars between 70-79g/km the rate is 25% for diesel and 21% for other fuel.

The government has stated that the top 37% rate will be frozen until 5 April 2028.

Company car tax rates 2026-27

Tax year		2026-27	2025-26	2026-27	2025-26
CO2 emissions (g/km)	Electric range (miles)	EV, petrol, other	EV, petrol, other	Diesel	Diesel
Nil		4%	3%
1–50	130>	4%	3%	8%	7%
1–50	70–129	7%	6%	11%	10%
1–50	40–69	10%	9%	14%	13%
1–50	30–39	14%	13%	18%	17%
1–50	<30	16%	15%	20%	19%
51–54		17%	16%	21%	20%
55-59		18%	17%	22%	21%
60-64		19%	18%	23%	22%
65-69		20%	19%	24%	23%
70–74		21%	20%	25%	24%
75–79		21%	21%	25%	25%
Each additional 5		Plus 1%	Plus 1%	Plus 1%	Plus 1%
Diesel 135		n/a	n/a	37%	37%
Other fuel 155+		37%	37%	n/a	n/a

Fuel benefit charges

CPI increases across the board for the fuel benefit charges for cars and vans came into effect on 6 April for the 2026-27 tax year.

The annual CPI inflation rises affect employers which provide employees with company vans available for private use, and pay fuel for private mileage in company cars and vans. 

The flat-rate van benefit charge increased to £4,170 from current £4,020. The multiplier for the car fuel benefit increased to £29,200, from £28.200. The flat-rate van fuel benefit charge increased to £798 from £769. 

The cash equivalent when a van is made available to an employee for private use will increase to £4,170.

Since 6 April 2021, the government has applied a nil rate of tax to zero-emission vans within van benefit charge. These measures maintain the environmental signal by increasing the charges in line with inflation.

Fuel benefit 2026-27

Vehicle	2026-27	2025-26
Car fuel benefit multiplier	£29,200	£28,200
Flat-rate van benefit charge	£4,170	£4,020
Van fuel benefit	£798	£769