Changes to Employee Car Ownership Schemes (ECOS) and how it might affect your business.

Who Will Be Affected

This measure will impact businesses and employers that offer vehicles through Employee Car Ownership Schemes (ECOS), as well as employees who receive vehicles under these schemes.

Overview of the Measure

As set out in the Autumn Budget 2024, the UK government is introducing changes to close existing gaps in benefit-in-kind taxation. These changes are intended to stop ECOS arrangements from being used to avoid income tax and National Insurance contributions when cars are made available for private use.

Under the new rules, cars provided through ECOS—when offered under specific restricted conditions—will be treated as taxable benefits.

Policy Aim

Company-provided vehicles used for private purposes represent a significant employment benefit. The government wants to ensure that appropriate taxes are paid in such cases. These changes aim to create a level playing field across the tax system, eliminate tax avoidance through ECOS, and support the environmental goal of encouraging zero-emission vehicles by reinforcing the existing emissions-based company car tax structure.

Background

The intention to incorporate ECOS into the company car benefit-in-kind framework was announced during the Autumn Budget 2024. This is part of a broader strategy to simplify and enforce fair taxation.

Detailed Implementation Plan

Start Date
These changes will come into effect on 6 October 2026.

Current Legislation
Relevant provisions currently exist in Chapter 6 of the Income Tax (Earnings & Pensions) Act 2003 (ITEPA).

Proposed Legal Updates
New legislation will amend Sections 114 to 118 of ITEPA to classify vehicles provided through certain ECOS arrangements as being available for private use and, therefore, subject to a benefit-in-kind charge.

A new section—116A—will be added to define what qualifies as an arrangement under these rules. A car ownership scheme will fall within scope if one or more of the following apply:

• Restrictions are placed on the employee’s private use of the car.
• The employee is not listed as the registered keeper.
• The arrangement includes a pre-agreed buyback or onward sale process.

You can find out more by visiting the UK Gov information page.