Comparison · Cars & Tax · 2026
Buying an Electric Car: Personally vs Through Your Company 2026
For a company director eyeing an electric car, the question is not just which model — but who should buy it. Run it through your limited company and you unlock a 4% benefit-in-kind rate, full corporation tax relief on a new EV, and the option to fund it via salary sacrifice. Buy it personally and there is no benefit-in-kind to report, but you pay for it entirely from money already taxed as salary or dividends, with no relief at all. This 2026 comparison weighs the two routes, factors in the new VED rules — £195 a year plus the £40,000-plus expensive-car supplement that now catches EVs — and charging costs, and works through a £45,000 EV example to show when each option wins.
TL;DR — 30-Second Summary
- • Company EV: 4% BIK, 100% first-year allowance, paid from pre-tax profit — usually the winner for directors
- • Personal purchase: no BIK, no paperwork — but funded from taxed income with zero tax relief
- • Salary sacrifice: a tax-efficient halfway house, exempt from the OpRA rules
- • VED: EVs now pay £195/year + a ~£410 expensive-car supplement above £40k list price
How Each Route Works
- • Company buys or leases the car
- • 4% benefit-in-kind on the list price (2026/27)
- • 100% first-year allowance on a new EV
- • Paid from pre-tax company profit
- • Company pays Class 1A NI on the BIK
- • Optional salary sacrifice funding
- • You buy the car in your own name
- • No benefit-in-kind, no P11D
- • No corporation tax relief on the cost
- • Funded from taxed salary or dividends
- • You can still claim 45p/25p business mileage
- • Simpler — the car is unambiguously yours
The Company EV Advantage
Three tax features make the company route compelling for a director:
- Low benefit-in-kind: just 4% of list price in 2026/27 (rising 1% a year). A £45,000 EV gives a BIK of £1,800 — costing a higher-rate director only £720 a year in income tax.
- Corporation tax relief: a new, unused EV qualifies for a 100% first-year allowance, deducting the whole cost against profit in year one — up to ~£11,250 of corporation tax saved on a £45,000 car.
- Paid from pre-tax profit: the company funds the car before corporation tax, rather than you extracting taxed dividends to buy it personally.
Compare this with extracting the cash personally: to buy a £45,000 EV from dividends, a higher-rate director must declare roughly £70,000 of dividends to net £45,000 after 35.75% dividend tax. That gap is the heart of the case for the company route. Quantify it with the electric car savings calculator and the dividend vs salary calculator.
Salary Sacrifice: The Halfway House
Salary sacrifice lets you fund an EV lease by giving up gross salary, saving income tax and National Insurance on the sacrificed amount. Electric cars are exempt from the “optional remuneration arrangements” (OpRA) rules that normally strip out the advantage of sacrificed benefits, so you are taxed only on the low 4% BIK value.
For an employee without their own company, or a director who would rather not buy the car outright, this is the most efficient route — and it is exceptional for anyone in the £100,000–£125,140 Personal Allowance taper, where the sacrifice also dodges the ~60% effective rate. See the salary sacrifice guide for the detail.
VED and the Expensive-Car Supplement
Electric cars lost their road tax exemption from April 2025. A new EV now pays a low first-year rate, then the standard annual VED of £195 in 2026/27.
EVs are also now caught by the expensive-car supplement: any car with a list price above £40,000 pays an extra supplement (around £410 a year) for five years from the second licence. So a £45,000 EV pays roughly £605 a year in VED for years two to six. The £40,000 threshold catches a large share of new EVs, so it is a real running cost — though a company-owned car can deduct it as a business expense. Check current figures with the road tax calculator.
Charging Costs
Charging is far cheaper than refuelling, but the route matters. Home charging on a cheap overnight EV tariff can cost just a few pence per mile; public rapid charging can cost several times that. A company can reimburse business charging and reclaim VAT on it, and workplace charging provided at the employer's premises is a tax-free benefit. For a personally owned car used for business, you can claim the standard 45p/25p approved mileage rate instead, which is intended to cover all running costs including charging.
Worked Example: A £45,000 Electric Car
A higher-rate director-shareholder buying a new £45,000 EV. Figures are illustrative for 2026/27.
| Factor | Company EV | Personal purchase |
|---|---|---|
| How it's funded | Pre-tax company profit | ~£68,000 of dividends to net £45,000 |
| Corporation tax relief | Up to ~£11,250 (100% FYA) | None |
| Benefit-in-kind cost | £1,800 BIK → ~£720/yr income tax | £0 |
| VED (years 2–6) | ~£605/yr (deductible) | ~£605/yr (not deductible) |
| Overall efficiency | Much higher for a new EV | Simpler, but no relief |
For a new EV, the company route wins clearly: the corporation tax relief and pre-tax funding far outweigh the small annual BIK charge. The personal route only catches up if the BIK rate climbs substantially over a long ownership period, or if business use is negligible. Model your own with the electric car savings calculator.
When Each Route Wins
- • You are a higher-rate director-shareholder
- • You are buying a new, unused EV (100% FYA)
- • You would otherwise fund it from taxed dividends
- • You will change the car within a few years
- • You want salary-sacrifice funding
- • The car is used mostly privately
- • You are not a company owner or director
- • You want to avoid BIK and P11D admin
- • You plan to keep the car many years
- • You are a basic-rate taxpayer with low business use