Tax year: 2026/27 | Last reviewed: 2 October 2026
An electric car is still one of the most tax-efficient benefits a limited company can provide. Low benefit in kind rates, full tax relief on purchase and tax-free workplace charging mean a director can drive a new EV for a fraction of the cost of buying one personally. Here is how it works in 2026/27, and why the timing matters before 31 March 2027.
Benefit in kind rates for electric cars
A company car is a taxable benefit. The taxable value is the car’s list price multiplied by a percentage based on its CO2 emissions. For zero emission cars the percentages are:
- 2026/27: 4%
- 2027/28: 5%
- 2028/29: 7%
- 2029/30: 9%
For comparison, a typical petrol or diesel car is at 25% to 37%.
Worked example
A director takes a £60,000 electric car in 2026/27. The benefit is £60,000 x 4% = £2,400.
- As a higher rate taxpayer, the director pays £960 of income tax for the year (£80 a month).
- The company pays Class 1A NI at 15%, which is £360.
The same car as a diesel at 37% would create a £22,200 benefit and around £8,880 of personal tax. That gap is why EVs dominate company car fleets. You can test your own figures with our company car tax calculator.
Buying: the 100% first year allowance
If the company buys a new, unused zero emission car, it can claim a 100% first year allowance, deducting the full cost from profits in the year of purchase. For corporation tax this applies to cars bought by 31 March 2027. On a £60,000 car that is up to £15,000 of corporation tax saved at 25%. Second-hand EVs and cars bought after the deadline go into the main pool instead, now relieved at only 14% a year. If you are thinking about buying, the next six months matter.
Be aware that if the car is later sold, the proceeds are taxable through a balancing charge, so this is relief brought forward, not a gift.
Leasing
Lease rentals for a zero emission car are fully deductible for corporation tax, with no 15% restriction (that applies to cars over 50g/km). The company can usually reclaim 50% of the VAT on the lease and 100% on a separate maintenance element. Leasing avoids tying up cash and the balancing charge question.
Charging
- Electricity for an electric company car charged at work is not a taxable benefit.
- A charge point installed at the business premises qualifies for capital allowances.
- If you charge at home, the company can reimburse you at HMRC’s Advisory Electricity Rate per mile tax-free, or reimburse the actual cost if separately metered.
- There is no fuel benefit charge for electricity.
Is it right for you?
An electric company car works best where the company is profitable and the director would otherwise buy a new car personally out of taxed income. It works less well where profits are low, the car is a used model, or mileage and range do not fit how you work. Hybrids can also be efficient if the electric range is long. See electric vs hybrid company cars for the comparison.
FAQs
What is the BIK rate for an electric car in 2026/27?
4% of the list price, rising to 5% in 2027/28.
Can my company claim the full cost of an electric car?
Yes, through the 100% first year allowance if the car is new and bought by 31 March 2027 for corporation tax purposes.
Do I need to report the car to HMRC?
Yes. The benefit is reported on a P11D, or payrolled through your monthly payroll if the company has registered to payroll benefits.
Talk it through with Digivolve
We model buy, lease and salary sacrifice options for directors before they order, so the tax relief lands in the right year.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.