Thousands of UK motorists could now be facing vehicle tax bills of over £10,000 a year due to sweeping changes in how company cars are taxed. The new rules, introduced by the Government and highlighted in recently released HMRC data, mark one of the most significant overhauls in Benefit-in-Kind (BiK) tax policy in recent years.
Chancellor Rachel Reeves' tax changes from the Autumn Budget will see some company car drivers, particularly those using reclassified double-cab pick-up trucks, pay up to £10,094 annually due to a sharp rise in Benefit-in-Kind rates and vehicle reclassifications. According to HMRC, the Government collected £1.19 billion in income tax from company car users in the 2023–2024 financial year, along with £470 million in National Insurance contributions.
GB News reported that the number of employees paying BiK tax rose by 10.5% compared to the previous year, bringing the total to 840,000 company car drivers. Despite this increase in taxpayers, the total taxable value of company car benefits fell from £3.6 billion in 2022–2023 to £3.27 billion last year.
This decline is largely due to the growing popularity of electric vehicles, which attract much lower BiK rates than petrol or diesel models.
According to the latest figures, electric vehicles now account for 41% of all company cars, and this shift has also helped reduce the average CO₂ emissions of company cars to just 56g/km.
Previously, a company driver using such a vehicle might have paid around £3,960 annually in BiK tax. Under the new rules, that figure can soar to as much as £10,094 per year, marking a 154% increase into the 37% BiK tax band.
As of 1 April 2025, most electric vehicles, including cars, motorcycles, and vans, have now also lost their exemption from vehicle tax.
This change ends the long-standing zero-rated tax benefit that had been in place to encourage electric vehicle adoption. Under the updated rules, only electric heavy goods vehicles (HGVs) with a weight exceeding 3,500kg remain exempt.
A number of vehicle categories remain exempt from vehicle tax, though they must still be registered as taxed through the DVLA.
Individuals with disabilities may claim a vehicle tax exemption for one vehicle used for their personal transport.
Organisations providing passenger transport services for disabled people can also qualify for vehicle tax relief, excluding ambulances.
Another example is classic vehicles built before 1 January 1985, which are also exempt from tax, provided they meet historic vehicle requirements. Other exempt categories include agricultural vehicles such as tractors and engines used for horticulture or forestry and vehicles used for no more than 1.5km on public roads.
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