HMRC has confirmed significant changes to Benefit-in-Kind (BiK) taxes affecting company cars, vans, and fuel, as part of the Labour government's tax authority's ongoing reforms. From April 6, 2027, employers will be required to report BiK through payroll software and Real Time Information, making reporting mandatory. This shift aims to modernise the tax system, reducing reliance on retrospective adjustments and complex processes.
Mandatory Payroll Reporting from 2027
According to HMRC, the new mandatory reporting measure will streamline how BiK taxes are paid. The tax authority stated: "This reform supports a more efficient and responsive tax system by reducing reliance on retrospective adjustments and complex processes. It improves clarity for taxpayers and helps businesses comply more easily with their obligations." The move contributes to the government's wider objective of creating a simpler, more digital, and more effective tax system that keeps pace with modern working and payroll practices.
New Company Car Tax Rates from April 2026
HMRC also published updated company car tax rates effective from April 6, 2026. The rates are based on CO2 emissions and electric range for plug-in hybrids. Key rates include: 0g/km and 1-50g/km with over 130 miles electric range at 4%; 1-50g/km with 70-129 miles at 7%; 1-50g/km with 40-69 miles at 10%; 1-50g/km with 30-39 miles at 14%; 1-50g/km with less than 30 miles at 16%. For higher emissions, rates increase progressively: 51-54g/km at 17%, 55-59g/km at 18%, 60-64g/km at 19%, 65-69g/km at 20%, 70-79g/km at 21%, 80-84g/km at 22%, 85-89g/km at 23%, 90-94g/km at 24%, 95-99g/km at 25%, 100-104g/km at 26%, 105-109g/km at 27%, 110-114g/km at 28%, 115-119g/km at 29%, 120-124g/km at 30%, 125-129g/km at 31%, 130-134g/km at 32%, 135-139g/km at 33%, 140-144g/km at 34%, 145-149g/km at 35%, 150-154g/km at 36%, 155-164g/km at 37%, and over 170g/km at 37%.
Impact on Drivers and Businesses
The changes are expected to affect thousands of company car drivers and employers across the UK. The new rates encourage lower-emission vehicles, with the lowest rates for zero-emission cars. The mandatory payroll reporting from 2027 will mean employers must integrate BiK calculations into their regular payroll runs, potentially increasing administrative burdens but also reducing errors and late filings.
Future Reforms in 2028
HMRC has indicated that further changes will be introduced in 2028, though specific details have not yet been released. The tax authority continues to consult with stakeholders to ensure a smooth transition. Employers are advised to prepare for the upcoming mandatory reporting requirements and review their company car policies to align with the new tax rates.
