Company cars usually come with a significant tax bill — but electric vehicles (EVs) are a major exception. The Benefit in Kind (BiK) rate for fully electric company cars is just 4% in 2026/27, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Compared to BiK rates of 25% up to the 37% maximum for most petrol and diesel cars, this makes an electric company car — whether through an employer-provided car scheme or salary sacrifice — one of the most tax-efficient perks available to UK employees and company directors.
What Is Benefit in Kind Tax on Company Cars?
When your employer provides you with a company car that you can also use privately, the value of that benefit is treated as income for tax purposes — called a Benefit in Kind (BiK). You pay income tax on the BiK value, and your employer pays Class 1A NI (15% since April 2025). The BiK value is calculated as: P11D value (list price including options, excluding first-year road tax) × BiK percentage. The BiK percentage depends on the car's CO2 emissions and fuel type. For 2026/27, zero-emission electric vehicles attract just 4% BiK. This is dramatically lower than petrol and diesel equivalents, which mostly sit between about 25% and the 37% maximum for cars of 155g/km CO2 or more.
- BiK = P11D value × BiK percentage = taxable benefit value
- You pay income tax on the BiK value
- Employer pays Class 1A NI (15%) on BiK value
- EV BiK rate 2026/27: 4%
- EV BiK rate 2027/28: 5%; 2028/29: 7%; 2029/30: 9%
How Much Could You Save With an EV Company Car?
Example: A Tesla Model 3 with a P11D value of £45,000. As an electric car at 4% BiK (2026/27): taxable benefit = £45,000 × 4% = £1,800. A basic-rate taxpayer pays 20% on £1,800 = £360/year. A higher-rate taxpayer pays 40% × £1,800 = £720/year. Compare this to a similar-priced petrol BMW 3 Series at, say, 25% BiK: taxable benefit = £45,000 × 25% = £11,250. Higher-rate taxpayer pays 40% × £11,250 = £4,500/year. The EV saves a higher-rate taxpayer about £3,780/year in company car tax alone — not counting fuel savings, lower servicing costs, or any salary sacrifice tax saving.
- £45,000 EV at 4% BiK = £1,800 taxable benefit
- Higher-rate taxpayer tax cost: £720/year
- Equivalent petrol at 25% BiK = £11,250 taxable benefit
- Higher-rate taxpayer tax cost: £4,500/year
- Annual saving on company car tax: about £3,780 (higher-rate taxpayer)
EV Salary Sacrifice Schemes
Many employers offer EV salary sacrifice schemes, where you give up a portion of gross salary in exchange for an electric car lease — saving income tax and NI on that portion of salary. This is particularly attractive because: the salary given up is pre-tax (saves income tax and employee NI), the low BiK rate means the taxable benefit is minimal, and your employer also saves employer NI. For a higher-rate taxpayer, the effective cost of leasing a car through salary sacrifice can be 40–50% lower than leasing privately after-tax. Providers include Octopus Electric Vehicles, Tusker, Onto, and various fleet management companies. Check whether your employer offers a scheme — if not, suggest it, as it also benefits them (employer NI savings).
- Salary sacrifice: pay for lease from gross salary (pre-tax, pre-NI)
- Higher-rate taxpayer: lease cost effectively 40–50% cheaper vs. private lease
- Employer NI savings incentivise employers to offer schemes
- Providers: Octopus EV, Tusker, Onto, fleet management companies
- Ask your HR team — salary sacrifice EV schemes are increasingly common
Home Charging and HMRC Rules
HMRC allows employers to reimburse employees for business electricity used to charge a company car at home at the Advisory Electricity Rate (AER): from 1 September 2026, 7p a mile for home charging and 15p a mile for public charging. HMRC reviews these rates every quarter. Home charging units (EV wallboxes) can be provided by the employer tax-free (OZEV Workplace Charging Scheme also helps with costs). If you charge your EV at a public charging point using an employer-provided charge card, there's no additional BiK. The overall result is that an EV through your employer can come with extremely low total tax cost, subsidised running costs, and a workplace charging setup — a compelling package compared to any petrol/diesel alternative.
- Advisory Electricity Rate from 1 September 2026: 7p/mile home charging, 15p/mile public charging (business miles)
- Home wallbox: can be provided by employer tax-free in some cases
- Public charging via employer card: no additional BiK
- Full HMRC guidance: gov.uk search 'advisory fuel rates'
- Company EV beats company petrol car on tax at almost every income level
Frequently Asked Questions
What if I want to buy an EV rather than lease through work?
If your employer won't do a scheme, consider buying privately. You lose the BiK advantage but gain ownership. Look into the low EV BiK rate if you ever move to a company that offers a scheme.
Are plug-in hybrids as tax efficient as full EVs?
No. Most PHEVs have higher BiK rates that depend on their electric-only range, and only those with more than 130 miles of electric range match the 4% EV rate in 2026/27. From 2028/29 all cars emitting 1-50g/km CO2 move to a flat 18% (19% in 2029/30), while full battery electric cars will be 7% and then 9%.
Can self-employed people benefit from company car EV tax?
Yes — if you operate through a limited company, the company can provide you with an EV and pay for it as a business expense. The BiK is minimal and the company gets capital allowances on the purchase.
Will the EV BiK rate stay low forever?
No. The government has set rates of 4% in 2026/27, 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Rates after that have not been confirmed, but even at 9% an EV is still far cheaper in company car tax than petrol equivalents.
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