Electric company car tax explained

What is company car tax?

Getting a company car is a real perk for employees. It’s often pretty exciting too. That can be tempered when you get lumped with a company car tax bill, however.

Tax is due as soon as a company car is used privately, which includes commuting to work. This is because it becomes known as a benefit in kind (BIK), with the good folk at HMRC deciding how much is owed based on several different things.

This year 2024/25, the electric vehicle company car tax rate stands at just 2% of an EV’s taxable list price. This is also known as the P11D value.

The following year this remains at 2%, keeping the level far below petrol and diesel vehicles, as well as plug-in hybrids. These other vehicles come within a new set of bands rising to a maximum of 37%, depending on emissions. Some diesel vehicles also attract an extra 4% supplement.

While the 2% rate for electric vehicles will remain up to April 2025, do not fret, as in November 2022 the UK Government announced plans to apply small incremental increases on EV company car tax, given renewed certainty and a longer term commitment of going pure electric.

• 2025/2026 = 3% BIK
• 2026/2027 = 4% BIK
• 2027/2028 = 5% BIK

To give these figures some context, although the rate is rising it still places electric cars significantly under rates of petrol, diesel and hybrid vehicles.

For example, an efficient petrol or diesel car which emits around 100g/km of CO2 is likely to have a BIK rate of 25% - still 5x the BIK level of an EV in 2027/28.

These benefit-in-kind rates make electric car super-affordable compared to petrol and diesel models. Reducing tailpipe emissions and reducing costs.

It's also a reason why EV salary sacrifice schemes are a great way to empower employees to go electric - just like our scheme.

As you can see, EVs offer enormous savings on company car tax compared to petrol and diesel models.

In the example above, a 20% income tax payer would save in 12 months over £1,500 in tax and a 40% income tax payer would save over £3,000 in tax.

Are electric cars good as company cars?

Electric cars aren’t just good as company cars – they’re great!

Whether you’re more concerned about reducing your carbon footprint or cutting costs, the UK’s ever-expanding public charging network means it’s easy to keep your battery topped up even if you cover a lot of miles each day.

If you're looking for an electric car lease, there's a huge amount of choice out there - whether you're in the market for a nippy city car or a luxurious motorway loving executive saloon, there's an electric car for you.

From the best green company cars to the essential steps of how to lease an EV, we’re here to help and guide you on our collective journey towards a cleaner, greener future.

Give us a call today on 01628 899 727 to discuss your business electric car leasing options – our friendly team will be more than happy to answer your questions.