EV Company Car BIK 2025/26 and 2026/27: Why It's Still a Deal
An electric company car had just 2% Benefit in Kind (BIK) rate in 2022–2024. It rises to 3% in 2025/26 and 4% in 2026/27 — still dramatically lower than 20-30% for petrol cars. On a £50,000 EV, a 40% taxpayer pays just £600/year in tax.
The BIK Rate Roadmap
HMRC has published EV BIK rates several years in advance to allow fleet planning:
| Tax Year | ZEV (Electric) | Low-emission (1–50g/km CO2) | Petrol 51–75g/km | Petrol 111–130g/km |
|---|---|---|---|---|
| 2022/23 | 2% | 2–12% | 15% | 26% |
| 2023/24 | 2% | 2–12% | 15% | 26% |
| 2024/25 | 2% | 2–12% | 15% | 26% |
| 2025/26 | 3% | 3–14% | 16% | 27% |
| 2026/27 | 4% | 4–15% | 17% | 28% |
| 2027/28 | 5% | 5–16% | 18% | 29% |
| 2028/29 | 7% | 7–18% | 20% | 31% |
EV BIK rates are rising — but from an extremely low base. Even at 7% in 2028/29, an EV will generate far less personal tax than any petrol or diesel equivalent.
How BIK Tax Is Calculated
Formula: BIK value = P11D value × BIK rate
P11D value = List price of car + factory-fitted options + delivery charges (minus any employee capital contribution up to £5,000)
Personal tax = BIK value × employee's marginal tax rate
Employer NI (Class 1A) = BIK value × 13.8%
Worked Example: £50,000 EV in 2025/26
| Electric car | Equivalent petrol (30% BIK) | |
|---|---|---|
| P11D value | £50,000 | £50,000 |
| BIK rate | 3% | 30% |
| BIK value (taxable benefit) | £1,500 | £15,000 |
| Tax for 20% taxpayer | £300/year | £3,000/year |
| Tax for 40% taxpayer | £600/year | £6,000/year |
| Tax for 45% taxpayer | £675/year | £6,750/year |
| Employer Class 1A NI | £207/year | £2,070/year |
| Employer saving vs petrol | £1,863/year |
Salary Sacrifice for EVs: The OpRA Exemption
Under standard salary sacrifice rules (OpRA), benefits are taxed on the higher of:
- The salary you sacrificed, OR
- The BIK value of the benefit
This means most salary sacrifice benefits lose their tax advantage. But zero-emission vehicles are specifically exempt from OpRA. They are always taxed on just the BIK value — regardless of what salary was sacrificed.
Why this matters
Suppose you sacrifice £600/month (£7,200/year) from your salary for an EV with a P11D value of £45,000:
| Without OpRA exemption (standard) | With OpRA exemption (EV) |
|---|---|
| Tax on higher of £7,200 or BIK | Tax only on BIK value |
| Tax on £7,200 at 40% = £2,880 | BIK = £45,000 × 3% = £1,350 |
| — | Tax at 40% = £540 |
| Net cost of sacrifice | £540/year personal tax vs potentially £2,880 |
The combination of salary sacrifice (saving income tax + NI on the sacrificed amount) and the ultra-low EV BIK rate makes EV salary sacrifice exceptionally tax-efficient.
Example: Basic rate taxpayer, £30,000 salary, sacrifices £500/month for EV (P11D £35,000):
| Item | Amount |
|---|---|
| Salary reduced to | £24,000/year |
| NI saving on £6,000 sacrificed (8%) | £480/year |
| IT saving on £6,000 sacrificed (20%) | £1,200/year |
| BIK tax owed (£35,000 × 3% × 20%) | £210/year |
| Net annual gain | £1,470/year (vs not having car in scheme) |
| Effective EV cost after tax benefit | £500/mo − £122.50/mo savings = ~£377.50/mo |
Comparison: EV vs Petrol Company Car Tax Bill
For a 40% taxpayer, the annual personal tax difference between driving an equivalent EV vs petrol company car:
| Car value | EV tax (3% BIK, 40%) | Petrol tax (28% BIK, 40%) | Annual EV saving |
|---|---|---|---|
| £25,000 | £300 | £2,800 | £2,500 |
| £35,000 | £420 | £3,920 | £3,500 |
| £50,000 | £600 | £5,600 | £5,000 |
| £70,000 | £840 | £7,840 | £7,000 |
A 40% taxpayer driving a £50,000 company petrol car saves £5,000/year in personal tax by switching to the equivalent EV. For most employees, this outweighs any difference in running costs for business use.
BIK vs Running Cost Savings
Company car drivers also benefit from lower EV running costs — particularly if home charging is provided or subsidised:
| EV (home charging) | Petrol equivalent | |
|---|---|---|
| 10,000 miles business fuel cost | ~£300 (HMRC advisory rate reimbursement) | ~£1,200 (petrol) |
| HMRC advisory electricity rate (per mile) | 7p/mile (2025) | — |
| Employer can reimburse | 7p/mile tax-free | 14p–22p/mile (AMAP) |
For employee-owned EVs used on business, the HMRC advisory electricity rate of 7p/mile allows tax-free reimbursement for charging costs. For employer-provided EVs, home charging can be funded tax-free via a charge point installation (up to £1,000 employer contribution) and a company-paid domestic electricity tariff or charge card.
The £5,000 Capital Contribution Discount
If you make a one-off capital contribution to the car (i.e., pay a lump sum toward the purchase), this reduces the P11D value:
- Maximum contribution: £5,000
- A £5,000 contribution on a £55,000 EV reduces P11D to £50,000
- BIK value drops accordingly: £50,000 × 3% = £1,500 (vs £1,650 on full P11D)
- Tax saving for 40% taxpayer: £60/year
The capital contribution reduces your BIK indefinitely for that car — worth considering if you want to reduce the company car's taxable value.
When an EV Company Car Doesn't Make Sense
Despite the tax advantages, a company car isn't always the right choice:
- You drive very low mileage — if you barely use the car, the BIK tax may exceed what you'd spend on a personal car
- You can do better on salary sacrifice — if salary sacrifice is available, you preserve the tax efficiency without a permanent salary reduction
- You're close to £100,000 income — company car BIK value is included in your adjusted net income, potentially accelerating the PA taper
- The car choice is limited — employer fleet choices may not include the EV you want
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