EV Company Car Tax 2026/27: Tesla, Polestar, BMW, BYD BIK Worked

QWhat is the EV company car tax rate for 2026/27?

4% of the car's list price (P11D value) is treated as taxable benefit-in-kind for fully-electric cars in 2026/27. Up from 3% in 2025/26 and 2% in 2024/25, planned to rise to 5% in 2027/28, 7% in 2028/29, and 9% in 2029/30 (Spring Budget 2024 confirmed the trajectory). For comparison, a typical petrol or diesel company car attracts BIK of 16-37% depending on CO2 emissions - so an EV at 4% delivers roughly 75-90% lower BIK tax than a petrol equivalent at the same price. The 4% is multiplied by your marginal Income Tax rate (20%/40%/45%) to get the annual personal tax bill. Employer pays Class 1A NI at 15% on the same BIK value. Schedule 4 of ITEPA 2003 sets the BIK calculation, with the EV-specific rates set by Treasury Regulations annually.

QHow is the BIK figure actually calculated?

Three steps. Step 1: BIK value = List price (P11D value) × BIK percentage. For an EV at £40,000 in 2026/27: £40,000 × 4% = £1,600 BIK value. Step 2: Personal tax = BIK value × your marginal Income Tax rate. A higher-rate employee: £1,600 × 40% = £640 annual tax. A basic-rate employee: £1,600 × 20% = £320 annual tax. Additional-rate: £1,600 × 45% = £720. Step 3: Employer Class 1A NI = BIK value × 15% (raised from 13.8% in April 2025). Same £1,600 BIK × 15% = £240 employer NI per year, charged to the company. The "list price" includes the manufacturer's recommended retail price PLUS VAT PLUS factory-fitted optional extras (delivery charge, number plates, road fund licence first-year - these are EXCLUDED from list price). The P11D value is locked at the date the car is first made available to the employee for private use, not when the car is bought.

QWhat about the EV BIK rate after 2026/27?

Confirmed trajectory in Spring Budget 2024 (Finance Bill 2024-25): 2025/26 = 3%, 2026/27 = 4%, 2027/28 = 5%, 2028/29 = 7%, 2029/30 = 9%. The 2pp jump between 2027/28 (5%) and 2028/29 (7%) signals Treasury's intent to taper the EV BIK advantage more aggressively as EV adoption scales. Even at 9% in 2029/30, EVs remain dramatically cheaper than petrol/diesel BIK at 25-37%. Beyond 2029/30, no formal commitment - HM Treasury reviews company car tax annually as part of the Budget cycle. Industry expectation: EV BIK levels off around 12-15% by 2032 (matching the lowest emission petrol/diesel category) and converges with conventional vehicles by 2035 when ICE new-car sales are banned. This trajectory is the dominant reason employers + employees are signing 4-year lease contracts NOW to lock in the lower BIK rates throughout the lease.

QHow does EV salary sacrifice work?

EV salary sacrifice combines THREE tax savings: (1) the EV is treated as a company car so BIK applies at low 4% rate instead of full income; (2) the sacrificed salary saves you 20%/40%/45% IT + 8%/2% NI on the LEASE COST portion; (3) the employer saves 15% Class 1A NI on the sacrifice (and often passes this to your lease cost). The OpRA (Optional Remuneration Arrangements) anti-avoidance rules introduced April 2017 specifically PRESERVED the salary-sacrifice benefit for ultra-low-emission vehicles - so EVs remain the dominant salary-sacrifice product despite OpRA killing most other sacrifice categories. Worked example: £600/month gross lease cost. Higher-rate earner sacrifices £600/month from salary. Income tax saved: £600 × 40% = £240. Employee NI saved: £600 × 2% = £12. Employer NI saved (passed through): £600 × 15% = £90. Net cost to employee after taxes: £600 - £252 = £348/month, plus BIK on company-car treatment (~£60-100/month for a £50k EV). Effective cost vs personal lease: 40-50% cheaper.

QIs there a benefit-in-kind for the home charging?

Yes but with major specifics. Electricity for charging the company car at home: HMRC Approved Mileage Allowance Payments (AMAP) treatment - if employer reimburses up to 9p/mile (Advisory Electricity Rate, AER) for business mileage, no BIK; reimbursement above AER is taxable. Electricity for charging on company premises: no BIK for employees using employer's charging point on employer's premises - exempt under Section 237A ITEPA. Electricity for charging at home for private use: cost should be borne by employee (no employer reimbursement) OR taxed as BIK at the actual cost reimbursed. Workplace home charging point installation: tax-free up to £350 grant amount; above £350 is BIK-able. Public charging while travelling on business: employer reimbursement at actual cost = tax-free. AER rate updated quarterly by HMRC (currently 9p/mile). A 200-mile business trip charged at home would receive £18 of reimbursement (200 × 9p) tax-free. The AER has been at 9p since June 2024, periodically reviewed but rarely changes.

QEV company car vs personal lease - which is cheaper?

Almost always company car / salary sacrifice for EV, at almost all income levels. Worked comparison for Tesla Model Y LR (£51,990 list price): Company car / salary sacrifice for higher-rate earner: monthly lease £650 gross, IT + NI savings £273, BIK tax £69 (£51,990 × 4% × 40% / 12), net monthly cost £446. Personal lease same car: monthly cost £550 from already-taxed income → equivalent gross cost £948 for higher-rate earner. Company car cheaper by ~£500/month or £6,000/year. The gap narrows for basic-rate earners (lower IT savings) but company-car still wins by £150-200/month. The gap will narrow further as BIK rises through 2028-2030 but remains favourable through at least 2030/31. For ICE cars the maths usually flips - personal lease wins or equals company car because the higher BIK (25-37%) outweighs the salary-sacrifice savings.

QWhat about used EV company cars?

Same BIK rules apply but List Price is calculated differently. For used cars, the "list price" used for BIK is the ORIGINAL UK list price when the car was new (not the current second-hand value). So a 3-year-old Tesla Model 3 currently worth £25,000 but originally listed at £40,000 would have BIK calculated on £40,000 × 4% = £1,600 BIK. This makes used company EVs LESS tax-efficient than new (paying tax on a higher value than the current market). Used EV salary sacrifice works but with this caveat. Some providers offer "Approved Used" EV schemes where the salary-sacrifice cost reflects the lower current market value but BIK still uses original list price. Trade-off: cheaper monthly lease cost but proportionally higher BIK as a % of market value. Most large salary-sacrifice providers (LeasePlan, Octopus Electric, Tusker, Drive Electric, Loveelectric) focus on new EVs because the maths is much cleaner.

QWhat if I run business mileage in my own EV?

Different scheme entirely - HMRC Approved Mileage Allowance Payments (AMAP). For personal cars used for business: 55p/mile first 10,000 business miles + 25p/mile thereafter (both EV and petrol get same AMAP rates). Employer pays this tax-free up to the AMAP rate. Anything above AMAP is taxable BIK. NOT a company car - the car remains your personal asset, no list-price BIK. This is the route for: contractors using their own car, employees doing limited business travel, anyone whose employer doesn't offer salary sacrifice. The cars/vans first-10k AMAP rate rose from 45p to 55p on 6 April 2026 - the first rise since 2011 - so the years of frozen relief have been partly clawed back. The case for AMAP vs salary sacrifice depends on annual business mileage: under ~5,000 miles AMAP often wins (no BIK, simple); above ~8,000 miles + commute mostly to single client/employer, salary sacrifice typically wins. See our mileage tax relief calculator for the per-trip math.

QCan my company buy an EV outright and what are the tax consequences?

Yes - and it's particularly tax-efficient for limited companies. Corporation Tax: 100% First Year Allowance on a new fully-electric car bought directly by the company (Section 45D Capital Allowances Act 2001). Means the company can deduct the FULL purchase price from taxable profits in the year of purchase. Worked example: £50,000 EV bought by company in year 1. Corporation Tax saving at 25%: £12,500 saved in year 1. The car becomes a company asset; director / employee uses it = standard BIK 4% applies. VAT: NOT reclaimable on cars (unless 100% business use, very rare; typically excluded under VAT (Cars) Order 1992). Future disposal: any gain or loss on selling the car flows back through the capital allowances pool. Hybrid vehicles (1-50g/km CO2 + 130+ mile range): same 100% FYA. Other vehicles: capital allowances pooled at 18% (main pool) or 6% (special rate pool) per year - much slower write-down. The 100% FYA for EVs is scheduled to remain available until April 2026 in current legislation, but typically extended in budget cycles. Verify before purchase as Treasury can revoke this in any Budget.

QWhat about plug-in hybrids (PHEVs)?

PHEV BIK depends on CO2 emissions AND electric-only range. For 2026/27: 1-50g/km CO2 AND 130+ miles electric range: 4% BIK (same as full EV - rare, only highest-spec PHEVs qualify). 1-50g/km CO2 AND 70-129 miles electric range: 6% BIK. 1-50g/km CO2 AND 40-69 miles electric range: 9%. 1-50g/km CO2 AND 30-39 miles range: 12%. 1-50g/km CO2 AND under 30 miles range: 14%. 51-54g/km: 16%. 55g/km+: continues up through standard CO2 bands to 37% at 170g/km+. Most current PHEVs claim 30-50 miles electric range = 9-12% BIK band. Mid-range PHEV (£40k list, 9% BIK): £40k × 9% = £3,600 BIK value × 40% IT = £1,440 annual tax. Compare to full EV (£40k list, 4% BIK): £640 annual tax. PHEV costs roughly 2-3× more BIK than full EV. PHEV salary sacrifice still works post-OpRA (qualifies as ULEV up to 75g/km CO2) but the economics are much less attractive than full EV.

QHow does BIK interact with the £100k taper trap?

Company car BIK counts as INCOME for adjusted net income (ANI) purposes. So a £50k EV at 4% BIK = £2,000 of BIK added to your ANI. For someone earning £99,000 salary, the £2,000 BIK pushes ANI to £101,000 - triggering Personal Allowance taper. This is rarely material for EVs at 4% BIK but becomes significant for higher-emission cars (25-37% BIK on £50k = £12,500-£18,500 of BIK adding to ANI). Higher-rate earners on £95k who take a £50k petrol company car can find themselves in the £100k-£125,140 PA-taper zone unintentionally. Mitigation: salary sacrifice into pension reduces ANI to compensate. £5,000 pension sacrifice cancels out £10,000 of BIK ANI impact (after 50% PA-taper rate). See our £100k tax trap for the full taper-zone math.

QWhat happens if I leave the job during a salary-sacrifice EV lease?

Depends on scheme rules - typically: the lease cannot transfer to you personally (it's the employer's lease, not yours). On leaving, common outcomes: (1) Employer pays "early termination fee" to the lease provider (~3-6 months of lease cost), often passed to the leaving employee as a payroll deduction or BIK. (2) New employer assumes the lease if both employers participate in the same scheme (rare but possible). (3) Scheme provider arranges a "novation" to your personal name at commercial lease rates (you take the car at full personal-lease cost going forward). (4) Car returned to lease provider, you make alternative arrangements. Schemes generally protect against involuntary termination (redundancy, illness, parental leave) with no early-termination cost. Voluntary resignation typically triggers the early-termination cost. Always read the scheme T&Cs BEFORE signing - the termination liability can be £3,000-£8,000 of personal cost. Most large schemes (LeasePlan, Octopus, Tusker) offer "early termination insurance" for ~£20-30/month covering involuntary termination scenarios.