Company cars are making a comeback – but for how long?
- 20th August 2025
The company car is enjoying something of a renaissance. HMRC’s latest statistics for 2023/24 reveal that 840,000 employees received a company car – an increase of 80,000 compared with the previous year. While still below the 2015/16 peak of 960,000, this marks a significant recovery from the low point of 720,000 in 2020/21.
Much of this resurgence is due to the favourable tax treatment for low-emission vehicles, particularly fully electric models. Cars with CO₂ emissions of 75g/km or less benefit from lower benefit-in-kind (BIK) rates, which can lead to substantial savings for both employees and employers.
One increasingly popular option is salary sacrifice. With income tax thresholds frozen, exchanging part of a salary for the use of a low-emission company car can generate meaningful tax and National Insurance savings. For example, an employee earning £65,000 who sacrifices £6,000 of salary to fund the lease of a mid-priced electric car could save around £1,800 a year in tax and NICs.
This shift is reflected in the fact that the number of zero-emission company car recipients has risen six-fold since 2020/21, now standing at more than 340,000 – 41% of all company cars provided. The average CO₂ emissions for company cars have fallen from 71g/km to 56g/km in the past year, while the share of diesel cars has dropped from nearly 50% in 2020/21 to just 13% today.
Electric company cars also bring the added advantage that there is no taxable fuel benefit, even if an employer provides free workplace charging.
Are electric company cars still tax efficient in the UK? Well, the tax landscape is set to change. The BIK rate for fully electric cars, currently 3%, will rise to 9% by 2029/30. For our £65,000-earning employee, the annual saving of around £1,800 could reduce to only a few hundred pounds. Without further policy adjustments, this may curb the current momentum in electric company car uptake.
For employers, the message is clear – now is the time to review company car policies and explore the potential financial benefits before the tax advantages begin to diminish. HMRC’s company car and fuel benefit calculator is a good starting point for assessing the costs and savings for your business and employees.
If you would like tailored advice on tax-efficient company car schemes for your business, talk to us today.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
