In our January blog, ‘2025 company car tax changes businesses should be aware of’, we flagged that you should proceed with caution on hybrids, with zero-emission electric vehicles (EV) being the long-term preferred route.

Fast forward to October, and those recommendations still ring true. The Benefit in Kind (BiK) framework and future tax percentages laid out remain in force. Nothing has changed since that announcement. 

The case for full EVs is becoming more compelling. Let’s look at the numbers: 

Driver X example: Hybrid

Let’s imagine Driver X has a hybrid vehicle worth £70,000.

For 2025/26 (the current tax year), Driver X pays tax on 9% of the list price, which is a benefit in kind (salary equivalent) of £6,300, and the tax they pay on this is 40% or £2,520.  

From the 2028/29 tax year, the percentage for this car goes up to 18%. Everything doubles, so the benefit is £12,600, and the tax is £5,040.

With no policy change, Driver X’s tax for that same hybrid increases by £2,520 over that period, which is a significant jump.

Driver X example: Full EV

Now, let’s compare that to a full electric vehicle scenario. The list price percentage Driver X will pay on a full EV is 3% in 2025/26, rising to 5% from 2027/28.

So, if Driver X had a full EV now with the same list price of 70k, the benefit in 2025/26 is £2,100, and the personal tax cost is £840 per annum (assuming Driver X is a 40% higher tax rate payer). In 2027/28, when the benefit is 5% it would be £3,500 and the tax £1,400 per annum.

With no policy change, Driver X’s tax for that same EV increases by £560 over that period, which is not only a lower tax burden overall, but also a less significant leap.

Comparing hybrid to EV in 2027/28 on the same value vehicle, Driver X’s personal tax bill will be £1,120 more.

We don’t expect these rates to change again anytime soon, by the way. But you never know…

What About Basic Rate Taxpayers?

If you’re a basic rate taxpayer (income up to £50,250) the rates on a hybrid are more manageable due to the fact you’ll pay a 20% tax rate on the BiK.

Using Driver X’s hybrid car again as an example, for a lower-rate taxpayer, the current personal tax cost is £1,260 this tax year (2025/26) compared to 2028/29, when the cost will be £2,520.

In summary

When we wrote the January post, we emphasised that hybrids must be approached with caution (especially long term) and that EVs remain the most tax-secure choice going forward. This is still the case. 

Meanwhile, petrol/diesel cars remain largely a non-starter for company car use.

If you’re ordering a double-cab pickup or commercial vehicle, the specific rules around classification may still apply (as outlined in the January post).

In short, the tax ecosystem built around company cars is solidifying in favour of full electric vehicles. And while hybrids may seem like a stepping stone today, they risk becoming tax-inefficient liabilities in a few years’ time, so approach them with caution…