Company car tax 2027 to 2031: every BiK rate, and the 2028 step that hits plug-in hybrids

Company car tax rates are now announced as far as 2030/31. The Budget on 28 October 2026 added one year to the schedule: every band rises by one percentage point on 6 April 2030, taking an electric car from 9% to 10% and the maximum rate from 39% to 40%. Everything before that was already law and did not change.

For anyone choosing a company car now, the date that matters most is not 2030. It is 6 April 2028, when plug-in hybrids lose the low rates their electric range earns them today. A plug-in hybrid that can cover 130 miles or more on electricity is taxed at 5% in 2027/28 and 18% the following year. On a £40,000 car that is £1,040 a year more for a basic-rate taxpayer and £2,080 more at the higher rate. An electric car at the same price goes from 5% to 7%.

How company car tax is worked out

Company car tax, or benefit-in-kind tax, is charged on a taxable value. That value is the car's list price, including options and accessories, multiplied by the appropriate percentage for its CO2 emissions. The driver pays income tax on it at their own rate, and the employer pays Class 1A National Insurance on it at 15%.

The list price is the price the manufacturer or importer publishes for that car, as the inclusive retail price, on the day before it was first registered. Accessories are added to it, and the employee can reduce it with a capital contribution of up to £5,000. Discounts the employer negotiates do not reduce it. Diesel cars that do not meet the RDE2 standard pay 4 points more, up to the maximum. THRIVE's company car tax calculator does the sum for any price, band and tax year.

Company car tax rates, 2025/26 to 2030/31

The rates to 2029/30 were set in earlier Budgets and are in law: Finance Act 2025 sets 2028/29 and 2029/30. The 2030/31 column is new. HMRC's impact note says the appropriate percentage for all emission bands, including zero emission, will increase by 1 percentage point, with a maximum of 40%, from 6 April 2030. It will be legislated in the Finance Bill 2026-27. The rows in the table are a selection. Every band from 51g/km rises one point a year from 2028/29, and the full table is on THRIVE's company car tax page.

The 2028 step for plug-in hybrids

Until April 2028, a car emitting 1 to 50g/km of CO2, which in practice means a plug-in hybrid, is taxed according to how far it can go on electricity alone. The longer the range, the lower the rate: 5% for 130 miles or more in 2027/28, rising to 17% for under 30 miles. From 2028/29 the range bands go. Every car in the 1-50g/km band pays the same rate, 18%, then 19% and 20%.

The government's reason, in its 2024 impact note, was to align hybrids "more closely with ICE vehicles, to further focus support towards electric vehicles". The effect depends on the car's range:

• 130 miles or more: from 5% to 18%, up 13 points.
• 70 to 129 miles: from 8% to 18%.
• 40 to 69 miles: from 11% to 18%, up 7 points.
• 30 to 39 miles: from 15% to 18%.
• Under 30 miles: from 17% to 18%.

So the hybrids that are best at running on electricity take the largest increase. A long-range plug-in hybrid and an electric car are taxed at the same 5% in 2027/28; a year later the hybrid pays more than two and a half times as much.

Newer plug-in hybrids have a further protection. Cars first registered from 1 January 2025 to 5 April 2028 under a newer emissions standard than Euro 6e (HMRC's wording is any standard other than Euro 6d-ISC-FCM or Euro 6e), which measures higher CO2 for plug-in hybrids, are treated as emitting 1g/km. That keeps them in the 1-50g/km band, where their range sets the rate until April 2028. A driver who has such a car on or before 5 April 2028 keeps the easement until the arrangement is varied or renewed, or 5 April 2031 at the latest. It does not protect them from the flat 18% that applies to the whole band from 2028/29.

Four years of tax on a £40,000 company car

A driver whose four-year agreement starts in April 2027 will be taxed in 2027/28, 2028/29, 2029/30 and 2030/31. THRIVE worked out the tax over those years for four cars with the same £40,000 list price.

Four years of company car tax on a £40,000 car

Higher-rate taxpayer, 2027/28 to 2030/31, £

Show the figures as a table

Electric	4,960
Plug-in hybrid, 130+ mile range	9,920
Plug-in hybrid, 40-69 mile range	10,880
Petrol, 120-124g/km	20,160

Over four years, the electric car costs a higher-rate taxpayer £4,960 in company car tax. The long-range plug-in hybrid costs £9,920, twice as much, although the two pay the same in the first year. The petrol car costs £20,160. At the basic rate the four totals are £2,480, £4,960, £5,440 and £10,080.

The employer's Class 1A National Insurance follows the same pattern, at 15% of the taxable value: £1,860 over four years for the electric car, £3,720 for the long-range hybrid and £7,560 for the petrol car.

The gap between electric and petrol barely narrows

Electric rates rise faster than petrol rates in percentage terms, from 5% to 10% over four years, but the gap in points hardly moves. A petrol car in the 120-124g/km band pays 25 points more than an electric car in 2027/28 and 23 points more in 2030/31. HMRC's impact note says rates for electric vehicles "will continue to increase gradually, while maintaining a significant differential between electric vehicles and internal combustion engine (ICE) vehicles".

The Treasury expects the 2030/31 rise to raise £310 million in that year and £345 million in 2031/32, figures certified by the Office for Budget Responsibility. HMRC estimates it will affect around 920,000 employees who drive a company car.

What about 2031/32?

No company car tax rates for 2031/32 have been published. HMRC's impact note describes the measure as giving "certainty on company car tax rates up to 2031", and the Budget document and the overview of tax legislation set rates for 2030/31 only. The GOV.UK publication page that introduces the impact note goes further than the note itself. Its Details paragraph says the zero-emission percentage "will increase by 1 or 2 percentage points per year in 2030 to 2031 and 2031 to 2032", rising "to an appropriate percentage of 12% or 15% in 2031 to 2032". That conflicts with the note's own one-point rise to 10% for 2030/31, and nothing in the Budget documents sets or explains a 2031/32 rate, so THRIVE does not use those figures. The last schedule, in Finance Act 2025, applied the 2029/30 rates to "the tax year 2029-30 and subsequent tax years"; the Finance Bill 2026-27 will show whether the 2030/31 rates are written the same way.

Tax through payroll from April 2027

From 6 April 2027, subject to legislation in the Finance Bill 2026-27, employers must report company cars and car fuel through payroll and deduct the tax in real time, HMRC says. Today most report benefits on a P11D after the year ends, and the tax is collected through the employee's tax code. HMRC will remove the current-year benefit from the tax code so that it is not taxed twice. It also warns that in the first two years some people may pay tax on this year's benefit through payroll while still paying amounts for earlier years through the old route. Employers have a one-year easement from penalties for certain non-deliberate inaccuracies.

Salary sacrifice

Cars that emit 75g/km or less are outside the special rules for cars provided through salary sacrifice, which HMRC calls optional remuneration arrangements. HMRC's guidance says that for these cars "you should always use the earnings charge under the normal benefit in kind rules". Electric cars, and plug-in hybrids at 75g/km or less, are in this group. Budget 2026 did not change this. THRIVE compares named electric cars on its salary sacrifice pages.

Pay-per-mile tax from 2028

Separately, from 1 April 2028, subject to legislation in the Finance Bill 2026-27, electric cars will pay Electric Vehicle Excise Duty at 3p a mile, and plug-in hybrids 1.5p, alongside ordinary road tax. The rate rises with inflation from 2029/30. It is a vehicle tax, not a benefit-in-kind charge, and the Budget says further guidance for fleet operators will follow.

Questions fleets are asking

What is the BiK rate for electric cars in 2027/28?

5%. It rises to 7% in 2028/29, 9% in 2029/30 and 10% in 2030/31 (subject to the Finance Bill 2026-27).

What are the company car tax rates for 2030/31?

One point higher than 2029/30 in every band: 10% for electric cars, 20% for cars emitting 1-50g/km, and a maximum of 40%.

Have BiK rates for 2031/32 been announced?

No rate has been set. Budget 2026 and the impact note set rates to 2030/31 only; a GOV.UK publication page refers to 12% or 15% for 2031/32, which nothing in the documents supports.

Why will plug-in hybrid company car tax rise in 2028?

From 2028/29 the electric range bands are removed, and every car emitting 1-50g/km pays one rate, 18%. In 2027/28 the same cars pay 5% to 17% depending on their range.

How much tax will I pay on a £40,000 electric company car?

In 2027/28, £400 a year at the basic rate and £800 at the higher rate. By 2030/31, £800 and £1,600.