Electric company cars attract the lowest benefit-in-kind (BIK) tax rate of any vehicle type in the UK. For 2026/27, zero-emission cars carry a BIK percentage of just 4% — a fraction of the 25–37% charged on conventional petrol or diesel company cars. Whether you are an employee weighing up a company car offer or a fleet manager reviewing policy, the numbers overwhelmingly favour going electric.
This guide covers the 4% BIK rate, how your tax bill is calculated, the rate trajectory through to 2029/30, employer costs including Class 1A NIC at 15%, salary sacrifice advantages, and the 100% First Year Allowance for corporation tax.
How the 4% EV BIK Rate Works in 2026/27
HMRC sets BIK percentages based on a vehicle’s CO2 emissions. Pure battery electric vehicles (BEVs) with zero tailpipe emissions sit at the very bottom of the table. For 2026/27, that rate is 4%.
To calculate your annual taxable benefit, multiply the car’s P11D value by the BIK percentage. The P11D value is the manufacturer’s UK list price including VAT, delivery charges, and factory-fitted options — but excluding the first registration fee and road tax.
Formula: P11D value × BIK % = taxable benefit → taxed at your marginal income tax rate.
This is the same mechanism used for all company cars, but the 4% rate means the taxable benefit on an electric car is tiny compared with a combustion-engine equivalent. For a full breakdown of every CO2 band, see our complete BIK rates table for 2026/27.
Worked Example: £40,000 EV vs £40,000 Petrol Car
The best way to grasp the savings is to compare two cars with the same P11D value — one electric, one petrol emitting 130 g/km (30% BIK).
Electric car — 4% BIK
| Item | Amount |
|---|---|
| P11D value | £40,000 |
| BIK rate | 4% |
| Taxable benefit | £1,600 |
| Annual tax (20% basic rate) | £320 |
| Annual tax (40% higher rate) | £640 |
| Monthly cost (basic / higher) | £27 / £53 |
Petrol car — 30% BIK (130 g/km)
| Item | Amount |
|---|---|
| P11D value | £40,000 |
| BIK rate | 30% |
| Taxable benefit | £12,000 |
| Annual tax (20% basic rate) | £2,400 |
| Annual tax (40% higher rate) | £4,800 |
| Monthly cost (basic / higher) | £200 / £400 |
A basic-rate taxpayer choosing the electric version saves £2,080 per year in BIK tax alone — roughly £173 per month back in the pocket. A higher-rate taxpayer saves £4,160 per year.
EV BIK Rate Trajectory: 2025/26 to 2029/30
The government has confirmed the BIK roadmap for zero-emission vehicles through to 2029/30. Rates rise gradually, but EVs remain dramatically cheaper than conventionally powered alternatives at every point.
| Tax Year | EV BIK Rate | Petrol Max BIK |
|---|---|---|
| 2025/26 | 3% | 37% |
| 2026/27 | 4% | 37% |
| 2027/28 | 5% | 37% |
| 2028/29 | 7% | 38% |
| 2029/30 | 9% | 39% |
Even at 9% in 2029/30, an electric company car attracts less than a quarter of the BIK rate of a high-emission petrol model. If you are signing a three- or four-year lease, the rates are published and can be factored into your cost modelling with certainty.
Employer Costs: Class 1A NIC at 15%
The savings are not limited to employees. Employers pay Class 1A National Insurance Contributions at 15% on the taxable benefit of every company car.
Using the same £40,000 example:
| Vehicle | Taxable benefit | Employer Class 1A NIC (15%) |
|---|---|---|
| Electric (4% BIK) | £1,600 | £240 |
| Petrol (30% BIK) | £12,000 | £1,800 |
| Annual saving per car | £1,560 |
For a business running 20 company cars, switching the fleet from petrol to electric saves over £31,000 per year in employer NIC alone. Combined with lower fuel costs and reduced maintenance, the total cost of ownership case for EVs is compelling.
Salary Sacrifice: The Most Tax-Efficient Way to Get an EV
Electric car salary sacrifice schemes amplify the tax advantage further. Under a salary sacrifice arrangement, you give up a portion of your gross salary in exchange for the use of a leased electric car. Because the deduction comes off your pay before income tax and employee NIC are calculated, the effective cost of the car is significantly reduced.
The only tax you pay is BIK at 4% on the P11D value — which, as shown above, is minimal.
Example — £40,000 EV, higher-rate taxpayer:
- Monthly lease cost (sacrificed from gross): £450
- Take-home reduction after tax/NI saving: approximately £261
- Monthly BIK tax at 40%: approximately £53
- Effective monthly cost: roughly £314 vs £450 on a personal lease
That is a saving of around 30%. Basic-rate taxpayers typically save 20–25%, and additional-rate taxpayers can save even more. Employers also benefit because they no longer pay 15% employer NIC on the sacrificed salary — a saving of £67.50 per month in this example.
For a deeper look at how salary sacrifice schemes work, see our guide to electric car salary sacrifice in the UK.
100% First Year Allowance: Corporation Tax Relief
Businesses purchasing zero-emission vehicles outright (or on hire purchase) can claim a 100% First Year Allowance (FYA). This allows the full cost of the car to be deducted from taxable profits in the year of purchase, rather than being written down gradually.
Example: A limited company buys a £40,000 electric car. At the 25% corporation tax rate, the 100% FYA delivers an immediate £10,000 tax saving in the year of purchase.
Key eligibility points:
- The car must be brand new — used EVs do not qualify for 100% FYA
- The car must be zero-emission — hybrids are excluded
- The allowance applies to outright purchases and hire purchase, not operating leases
- The 100% FYA for zero-emission cars has been extended to 31 March 2027 for corporation tax (5 April 2027 for income tax)
For a broader view of capital allowances on all vehicle types, see our guide to capital allowances on cars in the UK.
Summary
Electric company car tax in the UK remains extraordinarily favourable for 2026/27 and beyond:
- 4% BIK rate for zero-emission cars in 2026/27 — rising gradually to 9% by 2029/30
- A basic-rate taxpayer driving a £40,000 EV pays just £320 per year in BIK tax
- Employers save £1,560 per car per year in Class 1A NIC versus a petrol equivalent
- Salary sacrifice schemes reduce the effective cost of an EV by 20–30% or more
- The 100% First Year Allowance delivers immediate corporation tax relief on new EV purchases through to March 2027
- Rates are confirmed years in advance, giving businesses and employees planning certainty
Whether you are choosing your next company car, setting up a salary sacrifice scheme, or buying an EV through your limited company, the tax case for going electric has never been stronger.
Even with low BIK rates, keeping accurate mileage records remains essential — your employer needs them to reimburse business charging costs at HMRC’s advisory fuel rate, confirm genuine business use, and support P11D reporting. Tripbook tracks every journey automatically using GPS, lets you categorise trips as business or personal with a single tap, and exports clean mileage logs ready for your employer or accountant. Download Tripbook from the App Store to start logging your electric company car mileage from day one.
