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Electric Car Benefit in Kind UK 2026: How to Get a Tax-Efficient Company EV

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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 3% in 2025/26, rising to 4% in 2026/27 and 5% in 2027/28. Compared to 25–37% BiK rates for high-emission petrol 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 (13.8%). 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 2025/26, zero-emission electric vehicles attract just 3% BiK. This is dramatically lower than petrol/diesel equivalents: a 100g/km CO2 petrol car attracts 25%, while a 170g/km SUV attracts 37%.
  • •BiK = P11D value × BiK percentage = taxable benefit value
  • •You pay income tax on the BiK value
  • •Employer pays Class 1A NI (13.8%) on BiK value
  • •EV BiK rate 2025/26: 3%
  • •EV BiK rate 2026/27: 4%; 2027/28: 5%

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 3% BiK: taxable benefit = £45,000 × 3% = £1,350. A basic-rate taxpayer pays 20% on £1,350 = £270/year. A higher-rate taxpayer pays 40% × £1,350 = £540/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 nearly £4,000/year in company car tax alone — not counting fuel savings, lower servicing costs, or any salary sacrifice tax saving.
  • •£45,000 EV at 3% BiK = £1,350 taxable benefit
  • •Higher-rate taxpayer tax cost: £540/year
  • •Equivalent petrol at 25% BiK = £11,250 taxable benefit
  • •Higher-rate taxpayer tax cost: £4,500/year
  • •Annual saving on company car tax: ~£3,960 (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), currently 9p/mile for EVs. Home charging units (EV wallboxes) can be provided by the employer tax-free (OZEV Workplace Charging Scheme also helps with costs). For private use charging, employees can claim a flat rate. 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: 9p/mile for EVs (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 0% BiK advantage if you ever move to a company that offers it.

Are plug-in hybrids as tax efficient as full EVs?+

No — PHEVs have higher BiK rates (5–14% depending on their electric-only range). Full battery electric vehicles (zero emissions) attract the lowest 3% rate.

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 3% BiK rate stay low forever?+

No — the government has confirmed rates will rise gradually: 4% in 2026/27, 5% in 2027/28, and so on up to ~21% by 2035. But even at 10%, it's still significantly lower than petrol equivalents.

#company car ev uk#benefit in kind electric#electric car salary sacrifice#company car tax

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