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UK EV Company Car Tax: BiK Rates & Rules (2025–2028)

UK EV Company Car Tax: BiK Rates & Rules (2025–2028)

By Oliver Smith, Senior Automotive Tax AnalystLast updated: October 202615 min read
Statutory source alignment verified for October 2026 by Oliver Smith, Senior Automotive Tax Analyst (Statutory Research)

Quick Executive Summary: UK EV Company Car Tax Rules

  • Exceptional Tax Efficiency: Pure electric company cars (0g/km CO2) are taxed at an ultra-low Benefit-in-Kind (BiK) rate of 2% in 2024/25, increasing by 1% annually to 3% (2025/26), 4% (2026/27), and 5% (2027/28).
  • Massive Savings vs. Combustion Cars: A £50,000 petrol executive saloon (32% BiK) costs a 40% higher-rate taxpayer roughly £6,400 per year in personal tax. An identical £50,000 electric vehicle (3% BiK) costs just £600 per year—an annual personal saving of £5,800.
  • 100% First-Year Capital Allowances: Businesses that purchase brand-new electric cars can deduct the entire cost against Corporation Tax in the first financial year.
  • Workplace Charging Exemption: Electricity provided free to employees for charging their electric company cars at work is completely exempt from BiK fuel benefit charges.

What is the Benefit-in-Kind (BiK) Rate for Electric Cars in the UK?

The UK Benefit-in-Kind (BiK) rate for zero-emission electric vehicles is 2% for 2024/25, rising to 3% in 2025/26, 4% in 2026/27, and 5% in 2027/28. This remains drastically lower than petrol and diesel company cars, which range from 20% to 37%.

When an employer provides an employee or director with a car available for private use (including commuting), HM Revenue and Customs (HMRC) treats this as a non-cash fringe benefit. The value of this benefit is taxed according to carbon emissions (CO2 g/km) and official list price (P11D).

To support the UK's Net Zero ambitions, HM Treasury locked in long-term certainty for fleet operators by publishing statutory BiK rates through 2028:

Tax YearZero-Emission EV (0g CO2)PHEV (1–50g CO2, >130mi range)Standard Petrol / Diesel Car
2024 / 20252%2%25% – 37% (Maximum Cap)
2025 / 20263%3%26% – 37%
2026 / 20274%4%27% – 37%
2027 / 20285%5%28% – 37%

How Do You Calculate Company Car Tax on an Electric Vehicle?

To calculate annual company car tax on an EV, multiply the vehicle's official P11D value by the applicable BiK percentage (e.g., 3% for 2025/26) to find the taxable benefit. Then multiply that taxable benefit by your personal marginal income tax rate (20%, 40%, or 45%).

The Official HMRC Company Car Tax Formula:

Tax Payable = (P11D Value × BiK Rate %) × Employee Income Tax Band %

Step 1: A BMW i4 eDrive40 has a P11D value of £58,000.

Step 2: In the 2025/26 tax year, the EV BiK rate is 3%.

Step 3: Taxable benefit = £58,000 × 3% = £1,740.

Step 4: Basic-rate 20% taxpayer pays: £1,740 × 20% = £348 / year (£29 / month).

Step 5: Higher-rate 40% taxpayer pays: £1,740 × 40% = £696 / year (£58 / month).

How Do Electric Car BiK Rates Compare to Petrol & Diesel Cars?

Electric car BiK rates are up to 12 times lower than traditional internal combustion engine (ICE) cars, resulting in thousands of pounds in annual income tax savings for drivers.

Consider the stark contrast between two executive vehicles of equal market value (£48,000) for a 40% taxpayer in the 2025/26 tax year:

Tax ParameterPure Electric (e.g. Tesla Model Y)Petrol Saloon (e.g. BMW 320i)
P11D List Price£48,000£48,000
CO2 Emissions (g/km)0 g/km145 g/km
2025/26 BiK Percentage3%34%
Taxable Benefit Value£1,440£16,320
Annual Tax (40% Taxpayer)£576 / year (£48/mo)£6,528 / year (£544/mo)
Annual Employee Tax Saving£5,952 / year saved in personal income tax!

What are the Corporation Tax Benefits for Businesses Buying Electric Vehicles?

For UK companies, company cars are not just an employee perk; they are a powerful Corporation Tax shield:

  • 100% First-Year Allowances (FYA): Unlike petrol cars (which must be written down across years at 6% or 18% in the special or main rate capital allowance pool), 100% of the cost of a brand-new zero-emission car can be deducted immediately from trading profits in year one.
  • Substantial Corporation Tax Savings: For a company paying the main 25% Corporation Tax rate, purchasing a £60,000 electric vehicle reduces company tax liability by £15,000 (£60,000 × 25%) in that assessment year.
  • Zero Fuel Benefit Charge on Electricity: Under Section 149 of ITEPA 2003, electricity is not legally considered "fuel" by HMRC. Employers can pay for business mileage charging (at HMRC's Advisory Electricity Rate of 9p/mile) or provide free workplace charging without triggering any taxable fuel benefit.

Related UK Vehicle & Corporate Tax Guides

UK EV Tax CalculatorUK Electric Car Road Tax (VED) 2025/2026Cornerstone UK EV Tax & Rebate GuideUK PAYE Salary CalculatorNational Insurance CalculatorFinsiva UK Tax Portal