Electric Vehicle Tax Benefits
Why electric company cars have a lower Benefit in Kind percentage than most petrol and diesel cars in 2026-27. Educational only.
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.