Right now, thousands of UK directors and employees are bleeding tax through their company cars. And in 2526, HMRC just turned up the tap. Here's the catch. EVs, electric vehicles are still just 3% benefit in kind, while petrol and hybrid rates are climbing. And that 1% hike alone could cost you hundreds every single year. From April 2025, even electric cars over 40k get stung with a brand new £390 penalty plus £190 annual charge on top. The good news is you can still beat these new charges. In this video, I'll show you exactly how the new charges work, the traps to avoid, and most importantly, how to pick the right setup so you're not the one footing HMRC's bill. So, time to pull back the curtain on how company cars are really taxed. A company car is any vehicle your limited company gives you. And this is where the money really starts to bleed. If it's available for personal use, HMRC says you have to pay tax on it. First, let's define HMRC's idea of personal use because it is generous. Commuting, that's personal. Nipping a Tesco, personal. Even if the car just sits on your driveway overnight, if you could use it, HMRC assumes you do. Basically, if you've got keys in your pocket, you've got a benefit in kind. In other words, they're already charging you. But the secret is you don't actually pay tax on the full cost of the car. Instead, you're taxed on a percentage of its value known as the taxable benefit. And here's how HMRC works it out. So, the P11D value is the list price including VAT and delivery, but not road tax or registration. CO2 emissions, basically the dirtier the car, the higher your bill. and then fuel type whether it's petrol, diesel, hybrid or electric. And finally, the benefit in kind rate, BIK rate for the year. And the final number just went up in April. This is where most directors get caught out because they're still using last year's numbers while HMRC just quietly hikes those bands up. So, let's run the numbers on some real cars in 202526 because nothing wakes you up faster than seeing exactly how much you'll be charged. We'll use the most common scenario for directors, a 40% taxpayer earning over 50,270. If you're a basic rate taxpayer, the bills will be smaller, but the principle is the same. The wrong car could be costing you thousands. So, first up, let's look at a petrol Nissan Qashqai. For our example, let's say your company hands you the keys to this car. It's got CO2 emissions of 142 g per kilometer and a P1D value of 30,000. Now, in 2526, that puts it in the 34% Bick band. Here's what that means for your wallet. 30,000 multiplied by 34% gives you a taxable benefit of £10,200. And as a 40% taxpayer, that's £4,080 straight to HMRC every single year. It doesn't matter that the car's depreciating. You pay the same amount every single year. So if your pay slips mysteriously lighter, that free car could actually be a lot more expensive than you think. Now let's compare that to the hybrid Qashqai e power. This version of the car is much cleaner, just 19 g of CO2 per kilometer. And it's slightly pricier with the P1D value of 34,000. Now, when I keep mentioning P11D value, that's because that's the list price of the car, and the P11D is the form that's used to report this on. Now, because the emissions are so low with the hybrid, the Bick rate has dropped to 9% this year. So, here's the difference. 34,000* 9% gives a taxable benefit of £3,60. and your personal tax bill on that just £1,224. That's nearly £3,000 saved per year compared to the petrol version for the exact same badge on the bonnet. And finally, let's see what happens if we go fully electric with the Tesla Model 3. So, there's zero emissions, of course. And for this example, we'll say the P11D value is even pricier, which they usually are at 42,000. In 2526, fully electric cars still sit in the 3% big band, which is as close to a tax-free perk as you can get. So 42,000* 3% is a taxable benefit of 1,260. and your personal tax bill on that just £54 per year for a Tesla. That's it. Even after this year's rate rise, 2% last year or 3% this year, it's cheaper than your Spotify family plan and it's less than your average monthly phone bill. So, EVs are still the clear winners. But let's not get too comfortable. Since April this year, even electric drivers are getting stung. New rules mean road tax and luxury car sir charges are being added to your bill, and I'll show you exactly where in a moment. Figuring out which vehicle is best for you can get complicated quickly. If you're not sure whether a car, a van, or personal mileage claim is a best fit for your business, book in a free discovery call with us. We'll run the numbers with you and show you the most taxefficient setup for 2526. The links in the description. Now, most people think a van is just a car with a square bum. That's a million pound mistake. And here's why. HMRC has written an entirely separate rule book for vans. And if your business qualifies, the savings or the costs are ridiculous. If your company provides a van for personal use, yeah, even for that cheeky IKEA run, it does count as a benefit in kind. But the tax is different. You're already aware that vans play by completely different rules than cars. Well, the great news is that HMRC doesn't fuff about with P1D values, CO2 emissions, or endless big bands. They just slap on a single flat rate. Doesn't matter if it's a rusty old Transit or a shiny brand new VW Crafter with heated seats, the tax bill is exactly the same. So in 2526 the numbers are for a regular van the taxable benefit is £3,960. For a zero emission electric van it drops right down to £720. Now as a 40% taxpayer here's what you'd actually pay on a regular van. £1584 per year. on an electric van, just 288 per year. That's not a typo or an error. 288 quid for a fully electric van, no matter how much it costs your company. This is why a lot of directors, trades people, and creative businesses doing local deliveries will choose a van over a car. It's a taxefficient cheat code. The tax is low, predictable, and you avoid all the usual bit calculations completely. It costs them less than they spend on coffees a week of £5.54. But, and here's the most important warning, it only works if the van is genuinely used for business. If HMRC sees you rocking up with a pimped out transit that never carries more than the kids football boots, expect some very awkward questions. You've avoided the van trap and you've nailed your bit calculations. But what if you're still doing something that could get you an HMRC investigation? Speaking of awkward questions, up next, the three biggest mistakes directors make that trigger tax investigations and how to avoid them. The truth is, even if your vehicle choice is perfect, most directors don't get caught because the maths is wrong. They get caught because they misunderstand the rules, get sloppy with their claims, or worse, they get complacent and don't report things at all. Here are the three three most common slip ups that put HMRC's attention onto them. So, mistake one, misunderstanding personal use. This is the big one. This one trips up almost everyone because we think of personal use in simple terms. Well, I'm not blasting down the motorway to Marba in it, so it's all business. But HMRC's definition is much broader. Driving to the office, that's classed as personal use. Nipping out for a coffee or picking the kids up, still personal. Even if the car just sits unused on your drive overnight with the keys in your house, that still counts as being available for private use and it's taxable. Unless the vehicle is genuinely locked away at the business and unavailable to you, HMRC will treat it as a perk and a taxable one at that. Mistake number two, using a van like a car. Now, earlier we said vans can be a great tax win, and they can, but only if they're actually used for work. Plenty of directors start with purely business use only. Then before you know it, the vans doing school runs, weekends at center parks, or doubling as a family wagon. The problem is the second it's used for personal trips, HMRC will slap on the flat rate big charge. If you weren't reporting it, they'll happily backdate the tax with interest and a penalty. And that cheap van hack suddenly looks a lot less clever. Then mistake three, forgetting the new EV penalty. And here's the curveball for 2526. Electric cars have been a tax angel for years. 3% benefit in kind, minimal running costs, the works. But HMRC finally decided AEV drivers were having too much fun. From April 2025, any EV with a list price over 40K now gets stung with the expensive car supplement, 390 a year for 5 years. And the new £190 annual road tax, suddenly that cheap to run EV is costing an extra 580 a year before you've even plugged it in. So, yes, EVs are still the best deal going, but they're no longer the tax-free darlings they once were. And this is why getting your setup right really matters, because one slip here could cost you thousands. An HMRC will happily rub their hands together. But what if there's a way to get a company vehicle, keep it for yourself, and pay almost no tax at all? It's not magic. It's a tax strategy. Here are four moves that will help you win. So, let's talk about how to actually win the tax game. Because knowing the rules is one thing, but knowing how to bend them legally in your favor, that's where the real money is safe. Here are four strategies that work in 2526 if you want a company vehicle without HMRC rinsing your pay slip. Tip one, pick cars with low emissions and low P11D values. Two levers HMRC pulls are emissions, which set your bick percentage, and your P11D value, the list price of your car, which sets your taxable base. Keep both of these low and you're laughing. For example, choose a hybrid under 35,000 or an EV under 40,000. That's how you completely dodge the new expensive car penalties and keep your big rate in single digits. Big saving, small hassle. Tip two, use salary sacrifice for EVs. If your company offers salary sacrifice and you're not looking at it, you're leaving serious money on the table. And here's why. You give up part of your gross salary, which is pre-tax. In return, you get a brand new electric car from the company. The result, you pay less income tax and less national insurance. And because it's electric, the bick is 3% from April 2025, but still peanuts compared to petrol. It's basically like HMRC giving you a wink and saying, "Go on, have a Tesla. We'll look the other way." Tip three, keep it personal. Claim the mileage. Now, if your dream wheels are a big petrol SUV or anything flashy north of 40K, running it through the business is like pouring money into a paper shredder. Instead, keep it in your personal name, then charge your company mileage at HMRC's approved rates. 45p per mile for the first 10,000, 25p per mile after that. Here's the massive payout. You dodge Bick entirely. Your company still gets a corporation tax deduction and you get a nice tax-free mileage payout. For high emission cars, this is almost always the smarter play. And then tip four, run a van if it fits the job. If your business genuinely uses a van, this is one of the cleanest, cheapest wins in the entire playbook. The benefit is a simple flat rate, no faffing with CO2 tables. And in 2526, the numbers are a regular van, 1,584 personal tax for a 40% taxpayer. An electric van just 288 per year. It doesn't matter if it's a basic transit or a fully kitted out ean, the tax hit is the same. So that's why trades people, delivery directors, creative businesses holding kit around will generally choose fans. The tax is predictable, cheap, and HMRC proof. So, there you go. Four legal ways to take control of your vehicle tax and stop bleeding money to HMRC. You're now equipped with a strategies to make the right call on your company vehicle this year. See you in the next video.