Electric Vehicle Tax Benefits
The EV Tax Advantage
Pure electric vehicles (BEVs) have a Benefit in Kind tax rate of 4% for 2026-27 (3% in 2025-26), compared to 25-37% for most petrol and diesel cars. HMRC has published further increases through 2029-30.
This difference means the modelled income tax on a premium electric company car can be lower than on a basic petrol car, and the employer Class 1A NI follows the same BiK value.
Massive Tax Savings: The Numbers
Let's compare identical £45,000 cars with different powertrains (2026-27 tax year):
Petrol (BMW 330i)
Hybrid (BMW 330e)
Electric (BMW i4)
EV BiK Rate Trajectory
HMRC has published the zero-emission company car BiK schedule through 2029-30, so EV rates are predictable for forward planning:
| Tax Year | Pure Electric BiK % | Typical Petrol BiK % | Difference |
|---|---|---|---|
| 2024-25 | 2% | 25-30% | 23-28% |
| 2025-26 | 3% | 26-31% | 23-28% |
| 2026-27 | 4% | 27-32% | 23-28% |
| 2027-28 | 5% | 28-33% | 23-28% |
| 2028-29 | 7% | 29-34% | 22-27% |
| 2029-30 | 9% | 30-35% | 21-26% |
Total Cost of Ownership: EV vs Petrol
Beyond BiK tax, electric vehicles offer additional financial benefits:
Ultra-Low BiK Tax
Save £3,000-£5,000/year compared to equivalent petrol/diesel cars
Lower Fuel Costs
Electricity costs ~£3-5 per 100 miles vs ~£15-20 for petrol. Annual saving: £1,500-£2,500
Lower Servicing Costs
No oil changes, fewer brake replacements. Save ~£300-500/year
Zero Road Tax
EVs registered after April 2025 may have VED charges, but still lower than ICE vehicles
Employer Savings
15% Class 1A NI on benefits (from 6 April 2025) — illustrative employer saving of about £1,755/year on a £45k EV versus a comparable petrol company car
Practical Benefits Beyond Tax
Driving Experience
- Instant torque and smooth acceleration
- Quiet, refined cabin
- Low centre of gravity for better handling
Convenience
- Charge overnight at home
- Expanding public charging network
- Pre-condition cabin remotely
Considerations for EVs
Using Car Cost Comparison
Car Cost Comparison can show modelled Benefit in Kind for a zero-emission company car, or personal purchase and lease costs:
- Apply the 2026/27 4% appropriate percentage for 0 g/km cars
- See the income-tax figure on that cash equivalent at a chosen tax band
- Compare personal cost of ownership over the term you choose
- Include employer Class 1A NI on the company-car side
Figures are illustrative. They are not a recommendation of which car to choose.
Open Car Cost ComparisonImportant Information
- • This is educational content only and does not constitute tax or financial advice
- • Zero-emission BiK rates are published through 2029-30 but wider policy may change in future budgets
- • Consider your individual driving patterns and charging access
- • Calculations are illustrative - actual savings depend on personal circumstances
Further Resources
- GOV.UK - Company Car Tax and Benefits
Official HMRC guidance on company car benefits
- GOV.UK - Vehicle tax for electric cars
2026/27 VED rates. The passenger-car plug-in grant has ended; remaining grants are for some vans, taxis and motorcycles.
Common Questions
Why are electric company cars taxed differently?
HMRC’s BiK percentage is based on CO₂. Pure electric cars sit in the lowest band — 4% for 2026-27 in Kumberi’s tables — so the taxable benefit is a small slice of P11D price compared with petrol or diesel.
Do employers get a capital-allowance benefit on EVs?
Qualifying new electric cars can attract First Year Allowance, so the company may deduct the cost against profits in the year of purchase. That is a corporation-tax timing benefit, separate from the employee’s BiK tax.
Is 4% BiK guaranteed forever?
No. BiK percentages are set in legislation and have risen on a published path for EVs. Always check the tax year you are modelling. Kumberi uses the bands in its methodology for the years in the run.
Life Decisions That Use These Rules
Methodology first. These pages start from the life question and show what the engine actually applies.
- What Does A Company Car Cost In Tax?EV BiK percentages used in the illustration, not a dealer quote.