Britain’s push towards greener company cars is creating a tax divide, with high-mileage workers facing punishing bills while electric vehicle drivers enjoy huge savings, according to tax experts.
HM Revenue & Customs figures show that 920,000 company car users received a vehicle benefit during the 2024/25 tax year, with 51% driving fully electric cars — a surge driven by generous tax incentives designed to accelerate the switch away from petrol and diesel.
But leading audit and tax adviser Blick Rothenberg warns the policy is creating unintended consequences for employees who spend thousands of miles on the road for work.
Robert Salter, a director at the firm, said the tax system had created clear winners and losers.
“Where one group wins, another loses — in this case employees who need to drive long distances,” he said.
Many sales professionals and field workers regularly cover 20,000 to 30,000 business miles a year, often making fully electric vehicles impractical because of charging availability and range concerns.
Despite diesel company cars accounting for only 7% of benefit recipients, drivers of these vehicles face a 4% benefit-in-kind surcharge compared with equivalent petrol models.
Salter argued that the additional charge effectively penalises workers whose jobs require extensive travel.
“Individuals in such roles would rarely be able to benefit from a fully electric vehicle because of the mileage constraints of such vehicles,” he said.
The contrast is stark.
Under current rules, some of the cleanest company cars attract a benefit-in-kind tax rate of just 2% of the vehicle’s list price.
That means an employee receiving a new Tesla Model 3 worth around £50,000 could face a taxable benefit of only £1,000 for a full year.
For a higher-rate taxpayer, the annual tax bill could be around £400.
Meanwhile, a worker driving a far cheaper petrol or diesel vehicle for business purposes could face a significantly larger tax charge.
Salter highlighted the disparity by comparing a premium electric vehicle with a more modest company car.
A sales representative driving a Škoda Octavia costing around £30,000 could potentially face a benefit-in-kind charge seven or eight times higher than someone driving a much more expensive electric vehicle.
The result, he said, is a system that rewards environmental choices but does not always reflect the practical realities faced by workers.
The company car tax regime has been used by successive governments for more than a decade to encourage cleaner vehicles and reduce emissions.
However, experts say policymakers face a difficult balancing act between achieving climate targets and avoiding unfair penalties for workers who cannot easily switch to electric vehicles.
“There are no easy answers for governments in this area,” Salter said.
The challenge for ministers will be ensuring the green transition does not leave behind the employees whose jobs still depend on covering Britain’s roads — often at tens of thousands of miles a year.
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