Big changes are coming for businesses using employee car ownership schemes (ECOS). A quiet but significant change is on the horizon for businesses offering Employee Car Ownership Schemes (ECOS). Hidden in the draft Finance Bill 2025/26, the government has confirmed that ECOS arrangements will fall within the scope of taxable benefits in kind from 6 October 2026. This move is expected to impact nearly 76,000 company car and van drivers across the UK, many of whom currently enjoy a tax-efficient arrangement under ECOS.

Historically, ECOS structures have enabled employees to receive a vehicle through a credit-based arrangement, with legal ownership passing to them on day one. This allowed companies to avoid benefit-in-kind tax charges, as the vehicle was technically not provided by the employer. However, these schemes often included various restrictions—such as buyback clauses or retained keeper rights—that meant the practical use of the vehicle resembled a typical company car benefit. HMRC has long viewed these arrangements with scepticism, and the new legislation will formally bring such schemes into the tax net.

From 6 October 2026, any vehicle made available to an employee or their family under such “restricted” arrangements will be treated as a taxable benefit. This will apply where, for example, the employee is not the registered keeper, where the contract includes fixed transfer terms, or where conditions limit private use. The intention is clear: HMRC wants to align the tax treatment of ECOS vehicles with that of traditional company cars, ensuring that the economic substance of the benefit determines the tax outcome.

Employers who currently operate ECOS arrangements should take immediate steps to review the design of their schemes. Where the terms fall within the new definitions, they must begin preparing for the shift in tax treatment and communicate the potential impact to their employees well in advance. For many, this change could alter the financial attractiveness of the scheme and prompt a wider rethink of company car policies.

The Treasury expects this reform to raise approximately £275 million in its first year of implementation, with a sustained annual yield of £200 million thereafter. As with many such policy shifts, the full impact will depend on how businesses respond—but there is little doubt that ECOS, in its current form, will cease to offer the tax advantages it once promised.

This is not just a technical tweak; it marks the end of a long-tolerated workaround in employment tax. For employers and fleet managers, the time to reassess is now—not in 2026.