Buying an electric car through a limited company remains one of the most powerful tax moves a UK director can make in 2026/27. The government has extended 100% First Year Allowance (FYA) until April 2027, the Benefit-in-Kind (BIK) rate sits at just 4%, and corporation tax relief at 25% turns a £42,000 EV into a five-figure tax saving. Below is the full case, with real numbers and a step-by-step comparison against both a petrol company car and a personal purchase.
Why 2026/27 Is Still the Window for Company EVs
Two policy changes make this tax year particularly attractive for directors considering an electric vehicle through their limited company.
100% FYA extended to April 2027. Legislation in Finance Bill 2025-26 extended the 100% first-year allowance for zero-emission cars by one year. Your company can deduct the entire purchase price of a new EV from taxable profits in the year it is bought, rather than writing the cost down gradually. This applies to expenditure incurred on or before 31 March 2027 for corporation tax purposes (5 April 2027 for unincorporated businesses). Crucially, this only covers brand-new, unused zero-emission vehicles.
4% BIK for 2026/27. The appropriate percentage for zero-emission company cars rises from 3% (2025/26) to 4% in 2026/27, then 5% in 2027/28. Even at 4%, this is a fraction of the 25-37% charged on petrol and diesel cars. The annual personal tax bill on a £42,000 electric company car for a higher-rate taxpayer is just £672 — less than many directors spend on coffee.
Meanwhile, from April 2026 the writing-down allowance (WDA) main rate drops from 18% to 14%. That means a petrol or diesel company car — which does not qualify for FYA — now takes even longer to relieve against profits. The gap between EV and non-EV tax treatment has never been wider.
How the Corporation Tax Savings Work: £42,000 EV Example
Let us walk through a concrete example using a £42,000 electric car purchased outright by your limited company in 2026/27.
Year-one corporation tax saving. With 100% FYA, the company deducts the full £42,000 from its taxable profits. At the 25% main rate of corporation tax, that produces an immediate saving of £10,500. If your company falls within the small-profits rate (taxable profits under £50,000), the saving is £7,980 at 19% — still substantial.
BIK cost to the director. The P11D value of £42,000 at 4% BIK gives a taxable benefit of £1,680. A higher-rate (40%) taxpayer pays £672 per year in income tax on that benefit. A basic-rate (20%) taxpayer pays just £336.
Employer’s NIC. The company pays Class 1A NIC at 13.8% on the BIK value: £1,680 x 13.8% = £232 per year.
Running costs. Insurance, servicing, tyres and electricity for charging are all deductible business expenses when properly structured. Home-charging reimbursement at HMRC’s advisory electricity rate (currently 7p per mile for business journeys) creates no additional taxable benefit.
After accounting for the BIK tax and employer’s NIC, the net first-year position is a corporation tax saving of £10,500 minus £672 personal tax minus £232 employer’s NIC = £9,596 net benefit in year one alone.
EV vs Petrol Company Car: The Five-Year Comparison
The difference between an electric and a petrol company car is stark once you factor in BIK, capital allowances and employer’s NIC over five years.
For a £42,000 car and a 40% higher-rate taxpayer:
| Electric (4% BIK) | Petrol 130g/km (33% BIK) | |
|---|---|---|
| BIK taxable value per year | £1,680 | £13,860 |
| Annual income tax (40%) | £672 | £5,544 |
| Annual employer’s NIC (13.8%) | £232 | £1,913 |
| Capital allowance year 1 | 100% FYA = £42,000 | 14% WDA = £5,880 |
| Corp tax saving year 1 | £10,500 | £1,470 |
| 5-year BIK tax total | £3,360 | £27,720 |
Over five years, the electric car saves the director £24,360 in personal BIK tax alone. The company also benefits from £10,500 of corporation tax relief in year one, compared with just £1,470 for the petrol car under the new 14% WDA. For a deeper look at capital allowances on vehicles, see our guide to capital allowances on cars in the UK.
Company Purchase vs Personal Purchase
Directors sometimes ask whether they would be better off buying the EV personally and claiming mileage. Here is how the two routes compare.
Personal purchase with mileage claims. You buy the car yourself and claim the HMRC approved mileage rate of 45p per mile (first 10,000 business miles) and 25p per mile thereafter. At 8,000 business miles per year, that produces a tax-free reimbursement of £3,600. The company deducts this from profits, saving £900 in corporation tax. You receive no BIK charge, but you bear the full purchase cost, depreciation and running expenses personally.
Company purchase. The company buys the car, claims 100% FYA (£10,500 corp tax saving), and you pay just £672 per year in BIK tax. The company also deducts all running costs.
At 8,000 business miles per year, the company purchase route delivers roughly £9,800 more tax benefit in year one than the personal mileage route. The crossover only favours personal ownership at very low mileages — typically under 3,000 business miles per year. For a detailed breakdown of the 45p mileage claim route, see our limited company mileage claim guide.
VAT, Leasing and Hire Purchase Considerations
VAT on purchase. If the company is VAT-registered, VAT on a purchased car cannot be recovered where there is any private use — which almost always applies to a director’s vehicle. The full VAT-inclusive cost still qualifies for FYA, so the corporation tax relief applies to the gross price.
VAT on leasing. For a leased EV, 50% of the VAT on lease rentals is recoverable where there is mixed business and private use. Lease rentals are also deductible for corporation tax, though there is no FYA on leased vehicles.
Hire purchase. A car acquired on HP is treated as purchased for capital allowances purposes. The company can claim 100% FYA on the capital element and deduct the interest separately. This makes HP a popular route for directors who prefer to spread the cash outflow while still claiming full relief in year one.
For the full comparison between leasing and buying, see our guide on lease vs buy for business vehicles.
Keeping HMRC-Ready Mileage Records
Even with a company car, accurate mileage records matter. HMRC expects directors to distinguish between business and private journeys, particularly where the company is also reimbursing charging costs or claiming input VAT. Without a proper log, the deductibility of running costs and the BIK position can both be challenged.
Tripbook automatically records every journey with GPS tracking, categorises trips as business or personal, and produces HMRC-ready reports. For directors running an EV through a limited company, this means you always have the evidence to support your tax position — whether that is FYA, BIK or mileage reimbursement.
Download Tripbook from the App Store and start logging your business miles automatically.
The Bottom Line
Buying an electric car through your limited company in 2026/27 delivers a triple tax advantage: 100% FYA wipes the purchase cost from profits in year one, the 4% BIK rate keeps the personal tax bill below £700 for a higher-rate taxpayer, and corporation tax relief at 25% can save over £10,000 on a £42,000 vehicle. Compared with a petrol company car — now subject to a slower 14% WDA and BIK rates above 30% — the EV route saves tens of thousands over a typical ownership period.
The FYA window runs until April 2027. If you are considering a company EV, this is the time to act. Use Tripbook to keep your mileage records audit-proof from day one.
