Proposed Changes to Employee Car Ownership Schemes: What Company Car Drivers in Shropshire and Mid Wales Should Know

Updated: 28 October 2025:  General information only. This isn’t tax advice; please speak to your own adviser.

If you currently have a company car provided through an Employee Car Ownership Scheme (ECOS), or are considering your future car options, it’s a great time to be aware of upcoming changes to vehicle tax rules.

The UK Government has proposed an evolution in how some schemes are taxed, aiming to create a simpler, fairer system that aligns with the UK’s environmental goals. (These proposals cover both cars and vans.)

These changes are planned to come into effect from 6 October 2026. This guide explains what the changes are, why they are happening, and explores the opportunities they present for company car drivers.

What Are Employee Car Ownership Schemes (ECOS)?

For years, ECOS has been a popular way for employees to get a new car. In these schemes, the employee becomes the legal owner of the vehicle, often through a structured finance agreement. Because the car isn’t technically a traditional “company car,” it has been treated differently for tax purposes, often resulting in lower tax bills for the driver.

Why Drivers Appreciate Them

• Predictable, manageable monthly costs

• Access to the latest, most reliable vehicles

• A tax-efficient way to drive a new car

The Employee Car Ownership Scheme (ECOS) has provided a flexible and cost-effective benefit for many of the 76,000 drivers who use them.

What’s Changing and Why? A Focus on Fairness and the Future

The government’s proposed changes are part of a wider plan to modernise the tax system. The goal is to ensure that all employees with car benefits are treated consistently, while also reinforcing the emissions-based tax policy that encourages the switch to greener vehicles.

First announced in the Autumn Budget 2024 and detailed in draft legislation in July 2025, the new rules will bring many ECOS arrangements into the standard Benefit-in-Kind (BiK) company car tax system.

When an ECOS Car or Van Will Be Aligned with Company Car Tax

From 6 October 2026, an ECOS vehicle will be taxed like a company car if the arrangement includes features such as:

• Restrictions on private use by you or by a member of your family or household

• The registered keeper is someone other than you or a member of your family or household

• A guaranteed buy-back or onward-sale clause at a pre-agreed or formula-based price

Many ECOS agreements include one or more of these features, so a significant number may be affected — the best step is to check your own agreement.
(Nothing changes before 6 October 2026.)

Who Is in Scope?

ECOS Users

If your car is provided under an ECOS that meets the criteria above, its tax treatment is likely to change from October 2026.

Employers

Businesses currently offering ECOS are already planning for the future and exploring modern alternatives.

Private Buyers

This does not affect you. If you buy your car privately, with a personal loan, or through personal contract purchase, these changes do not apply.

The Opportunity: New, Greener, and More Tax-Efficient Options

This shift creates a strong moment to explore the benefits of modern, low-emission vehicles.
The company car tax system is designed so that zero-emission and low-emission cars typically attract lower BiK percentages than petrol or diesel, making them attractive for many drivers.

Employers are increasingly looking at alternatives that offer great value:

Electric & Hybrid Company Cars

EVs generally have lower BiK than petrol/diesel, and many drivers enjoy low running/servicing costs. Plug-in hybrids (PHEVs) can also be competitive depending on their CO₂ rating and electric range.

Salary Sacrifice Schemes

Swap a portion of your pre-tax pay for a new EV; many drivers benefit from the way income tax and National Insurance interact with BiK on low-emission cars.

Cash Allowances

Some employers offer a cash alternative, giving you flexibility to choose and finance your own vehicle.

What Should Company Car Drivers Do Now?

There is no need for any immediate action, but planning ahead is smart.

• Stay Informed: Watch for final confirmation of the rules in the Autumn Budget 2025.

• Talk to Your Employer: They can explain how your specific scheme may evolve towards 2026.

• Explore Your Options: If your renewal is due in the next 12–18 months, test-drive an EV or PHEV and consider your mileage, charging access, and driving style.

In Summary

For company car drivers in Shropshire and Mid Wales, these upcoming changes are a positive step towards a fairer and greener future.
The shift away from ECOS opens the door to modern, tax-efficient benefits like EV company cars and, where offered, salary sacrifice schemes.

The government’s aim is to align the tax system with its environmental goals — creating incentives for drivers to embrace the future of motoring.

Here at JT Hughes, we’re staying ahead of these developments. We’re ready to help you understand your options and find a vehicle that works for you, your family, and your tax bill.

Frequently Asked Questions (FAQs)

What is an ECOS?

An Employee Car Ownership Scheme (ECOS) is a car benefit where the employee legally owns the vehicle from day one, which has historically placed it outside of traditional company car tax.

When do the new tax rules start?

The proposed changes will apply from 6 October 2026. Nothing changes before then.

Will my ECOS car definitely be affected?

It’s very likely. If your agreement has restrictions on private use, a buy-back clause, or you are not the registered keeper, it will fall under the new rules from October 2026.

Does this affect me if I buy my car privately?

No. These changes only apply to cars provided through employment-linked ECOS arrangements.

Is it worth switching out of my ECOS now?

There’s no need to rush. The rules are not yet final and won't take effect until October 2026. The best first step is to speak with your employer about their plans for the transition.

If my car is affected, how is the new tax calculated?

It will be calculated using the standard Benefit-in-Kind (BiK) system. This uses the car’s list price (P11D value) and a percentage based on its CO₂ emissions.
Electric and low-emission cars have the lowest percentages, making them the most tax-efficient choices.