Taxation of company cars: the appropriate percentage for tax years 2030 to 2031 and 2031 to 2032
Published 28 October 2026
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Who is likely to be affected
Businesses and employers that provide company cars and employees provided with company cars that are made available for private use.
General description of the measure
As announced at Budget 2026, the appropriate percentage used to calculate an individual’s company car tax for all emission bands, including for zero emission vehicles, will increase by 1 percentage point, the maximum percentage increase will be 40% for the tax year 2030 to 2031.
Policy objective
This measure will provide certainty on company car tax rates up to 2031, including continued incentives to support the take-up of zero emission and electric vehicles.
In addition, the increase in appropriate percentages will make sure the tax system continues to support the sustainability of the public finances.
Rates for electric vehicles will continue to increase gradually, while maintaining a significant differential between electric vehicles and internal combustion engine (ICE) vehicles.
Background to the measure
The appropriate percentages for company cars for the tax year 2025 to 2026 through to the tax year 2027 to 2028 were announced at Autumn Statement 2022 and legislated for in Finance Act 2023.
The appropriate percentages for company cars for the tax years 2028 to 2029 and 2029 to 2030 were announced at Autumn Budget 2024 and legislated for in Finance Act 2025.
The changes in the appropriate percentage for company cars for the tax year 2030 to 2031 were announced at Budget 2026.
Detailed proposal
Operative date
This measure will take effect from 6 April 2030 and the rate changes will apply from the tax year 2030 to 2031.
Current law
Sections 121 to 148 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) provide for calculating the cash equivalent of the benefit of a company car which is made available for private use. In broad terms, this depends on the list price of the car plus taxable accessories, multiplied by the level of CO2 emissions the car produces, which is expressed as the appropriate percentage.
Proposed revisions
Legislation will be introduced in Finance Bill 2026-27 to make the following changes.
Section 139 of ITEPA sets out the basis for calculating the appropriate percentage for cars with registered CO2 emissions.
Section 139(1) and section 139(3)(a) of ITEPA will be amended to increase the appropriate percentages for zero emission vehicles and all other emission bands by 1 percentage point for the tax year 2030 to 2031.
Section 139(3)(b) of ITEPA will be amended to increase the appropriate percentage limit by 1 percentage point for the tax year 2030 to 2031.
Section 140 of ITEPA sets out the rules for cars without a CO2 emissions figure.
Section 140(3)(a) of ITEPA will be amended from 9% to 10% for the tax year 2030 to 2031 to reflect the appropriate percentage for zero emission vehicles.
Section 140(3)(b) of ITEPA will be amended to reflect the 1 percentage point increases in the appropriate percentage and appropriate percentage limit for the tax year 2030 to 2031.
Section 141 of ITEPA sets out the rules for diesel cars. Step 3 in section 141(2) will be amended to reflect the 1 percentage point increase in the appropriate percentage limit for the tax year 2030 to 2031.
Section 142 of ITEPA sets out the rules for cars registered before 1 January 1998. Sections 142(2) and 142(3) will be amended to reflect the 1 percentage point increases in the appropriate percentage and appropriate percentage limit for the tax year 2030 to 2031.
Summary of impacts
Exchequer impact (£million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| — | — | — | — | +310 | +345 |
These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2026.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will impact an estimated 920,000 employees who drive a company car. It is anticipated that these individuals will see increased costs due to the change in appropriate percentages.
Customer experience is expected to remain broadly the same as there is no change to how individuals interact with HMRC.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure may apply to individuals regardless of protected characteristics, and any protected groups that are overrepresented could therefore be disproportionately impacted. This measure is expected to impact on individuals who are provided a company car by their employer.
Those aged 35 to 64 are estimated to be overrepresented in the population who receive a company car (78%) compared to their prevalence in the UK adult population (45%). Males are also estimated to be overrepresented (77%) compared to their prevalence in the UK adult population (49%), as are those from a White — English, Welsh, Scottish, Northern Irish or British ethnic background (87%), compared to their prevalence in the UK adult population (82%).
Where data was available no other protected group was estimated to be overrepresented in the population who receive a company car from their employer.
Administrative impact on business including civil society organisations
This measure is expected to have a negligible impact on at least an estimated 160,000 businesses who provide company cars from 6 April 2030. Businesses will need to make sure the new appropriate percentages coming into effect from 6 April 2030 are used for the purposes of calculating company car tax and related charges. One-off costs will include familiarisation with this change. There are not expected to be any continuing costs.
Customer experience is expected to stay broadly the same because the method of reporting company car tax remains the same. The new appropriate percentages will be published in advance to support businesses to familiarise themselves with changes.
This measure is not expected to impact civil society organisations.
Operational impact (£million) (HMRC or other)
HMRC will implement these changes as part of business as usual activity and at minimal cost.
Other impacts
While increasing the appropriate percentage rates for electric cars, there continues to be a differential between rates for electric vehicles and all other vehicle types.
Therefore, this measure supports the government’s climate change objectives by encouraging the take up of zero-emission vehicles as company cars. This will reduce carbon dioxide emissions due to transport and improve air quality.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The policy will be kept under review through regular communication with taxpayer groups affected by the measure.
Further advice
If you have any questions about this change, contact the Employment Benefit and Expenses Policy Team by email policyemploymentbenefitsexpenses@hmrc.gov.uk.