Yesterday, during the Autumn Budget 2025, the UK Government announced a significant update for businesses and employees using Employee Car Ownership Schemes (ECOS). In July this year, it was announced in the Draft Finance Bill 2025-26 that changes to the Benefit-in-Kind (BiK) rules would be implemented in October 2026.
Read more about the draft legislation in our blog: Important Update – Employee Car Ownership Schemes (ECOS).
It was announced in the Budget, that any changes have now been delayed until April 2030.
Managing Director Paul Taylor says: “We’re pleased that the Government has listened to the representations made by CBS and the wider automotive industry. The decision to delay the proposed changes to ECOS legislation is welcome.”
What was planned?
In the Autumn Budget 2024, the Chancellor, Rachel Reeves stated legislation would be issued to end contrived car ownership schemes. The newly proposed s116A Income Taxes (Pensions and Earnings) Act 2003 effectively amended the definition of a company car by introducing qualifying arrangements so that an ECOS arrangement would be taxed as a company car under Benefit-in-Kind (BiK) rules. The qualifying arrangements were outlined as:
- where there are restrictions on the employee’s private use of the vehicle
- where the employee is not the registered keeper of the vehicles
- where, as part of the arrangement, there is a set buyback or onward sale arrangement
The aim was to create equality across all car benefit schemes. However, the automotive industry raised concerns about the impact on the number of cars sold, on the industry as a whole and the loss in tax revenue.
What's changing now?
Following significant representations from CBS, the SMMT, OEMs and leading figures in the automotive sector, the Chancellor, in this Budget has confirmed:
- Implementation of the draft s116A ITEPA 2003 legislation has been pushed back to April 2030 giving businesses and employees more time to adapt.
- Transitional arrangements for existing contracts and for those still in ECOS agreements at that time. A transition period of 2 years meaning that arrangements existing prior to commencement of the new legislation can continue without a change in treatment until the earlier of the arrangement being varied, renewed, or 6 April 2032*.
- Exemptions from the BiK rules for vehicles provided on arm’s length terms within the motor industry will apply.
This delay reflects ongoing consultation with industry stakeholders and recognition of the role ECOS plays in supporting mobility and affordability for employees.
*The Budget 2025 document at 4.237 states ‘with transitional arrangements until April 2031’. However, Table 4.1 Budget 2025 policy decisions reference a two-year transition period, as does HMRC Policy paper Changes to Employee Car Ownership Schemes (ECOS). We’re awaiting clarification from HMRC.
What does this mean for your business and your employees?
Employers
You can continue to run ECOS as you currently do, however, there’s still a need to plan for the future. Our new solution, that we’re continuing to develop preserves affordability long-term. We also offer our salary sacrifice solution, which is unique and is tailored specifically to automotive retailers. It offers short vehicle cycles, meaning cars can be changed more frequently to meet the needs of your business and mitigate RV risk.
Employees
They’ll have continued access to ECOS without immediate tax changes. CBS’ range of current and new solutions will ensure that they can continue enjoy an attractive and affordable car benefit in the long-term.
What about EVs?
There were changes announced in the Budget for EVs too, these include:
Electric Vehicle Excise Duty (eVED)
The Government is introducing a new pay-per-mile tax for EVs and PHEVs from April 2028. In addition to the existing Vehicle Excise Duty (VED), electric cars will attract a new charge of 3 pence per mile (ppm) and PHEVs will be charged at 1.5ppm. Both these mileage rates will increase annually with CPI.
The Government has argued that these new measures are to be introduced as matter of fairness to petrol and diesel drivers. The Government has published a consultation which provides further detail on how eVED will work and is seeking views on how it should be implemented.
Vehicle Excise Duty (VED) & Expensive Car Supplement (ECS)
The VED Expensive Car Supplement threshold is increasing to £50,000 for EV and zero-emission vehicles only. This change takes effect from 1 April 2026 and applies to EVs registered from 1 April 2025 onwards.
Due to EVs being generally more expensive than comparable model ICE vehicles they have been disproportionately affected by the current blanket threshold. This will reduce the running costs of a significant number of EVs.
Electric Car Grant
The Electric Car Grant has been extended to 2029-30 with the Government providing an additional £1.3 billion in funding. The lowest CO2 emission cars in Band 1 receive a grant of £3,750, with Band 2 vehicles receiving £1,500. However, so far only four car models have been awarded the Band 1 grant of £3,750.
EV Charging Infrastructure
The Budget contained several measures to improve EV charging infrastructure to facilitate the increased uptake in EVs as we head to 2030 when ICE vehicles can no longer be registered. These measures include:
- £100 million investment in EV charging infrastructure, including to support the installation of home and workplace charge points.
- A further £100 million investment available to local authorities and public bodies to accelerate installation of charge points where people live and work.
- 100% business rates relief for a period of 10 years for eligible electric vehicle charging points and electric vehicle only forecourts
- A consultation on permitted development rights for cross-pavement EV charging, which will make gaining access to EV charging quicker and cheaper for households without driveways.
Changes to write-down allowances
From April 2026, the main rate of writing down allowances will drop from 18% to 14%. This will have the effect of increasing the post tax cost of owning or leasing company cars by reducing the amount of corporation tax relief.
The Government has decided to extend for a further year, through to March 2027, the 100% first year allowances (FYA) for qualifying expenditure on zero emission cars. This relief isn’t available to leasing companies.
To incentivise business investment in charging infrastructure the Government has also extended the 100% FYA for EV charge points through to March 2027.
Company car tax
The Government hasn’t made any amendments to the BiK company car tax bands and rates published in October 2024. However, in the Budget it confirmed that it will introduce a temporary BiK tax easement for PHEVs to prevent their tax charge increasing significantly due to new emissions standards. This easement will be in place from 1 January 2025 to 5 April 2028.
For those PHEV’s meeting the required conditions, the CO2 emission figure during the easement period will be deemed to be a nominal figure of 1g/km for the purposes of the BIK charge rather than the CO2 figure on the registration document.
The conditions that a vehicle must satisfy to be eligible for the easement are:
- The vehicle was first registered on or after January 2025;
- the vehicle’s quoted CO2 emissions figure is 51g/km or more;
- the vehicle was registered under any emission standard other than Euro 6d-ISC-FCM or Euro 6e; and
- the car’s electric range figure is one mile or more.
It’s estimated that approximately 150,000 PHEV company car drivers will be protected against higher CO2 emissions and, as a result, increased BiK.
Looking ahead
Our purpose is to provide every customer with a rewarding, value-adding car scheme, regardless of vehicle type or employee status and that’s why we believe a blended car benefit package is the best solution. Here at CBS, we can provide an employee benefit for all powertrains and we’re always hard at work evolving our solutions.
Choosing us as your partner for employee car benefits means you have peace of mind that your schemes are technically and compliantly managed, leaving you free to focus on driving your business forward.
We’re continuing to work on our new solution, having completed the technical design, we’re awaiting publication of the final legislation to complete our operational platform. Our customers will then be able to choose when they wish to implement change ahead of any new taxation rules coming into effect.
We understand that you may have some further questions, and we’re here to help. If you’d like to chat, don’t hesitate to contact your CBS representative. We’re always happy to support you.