Electric company cars have been one of the most tax-efficient perks available to UK company directors and employees in recent years. With ultra-low Benefit in Kind (BIK) rates and generous tax relief, they’ve helped many businesses reduce tax while upgrading their vehicles.
But as we move into 2026, many directors are asking the same question: are electric company cars still worth it from a tax point of view?
In this guide, we explain how electric company car tax works in 2026, what’s changed, and whether it still makes financial sense for your business. If you want to speak to a professional accountant in Gravesend, Kent, UK, get it touch with King and Taylor.
How Are Company Cars Taxed in the UK?
When a company provides a car for personal use, it’s classed as a Benefit in Kind (BIK). This means:
- The employee or director pays income tax on the benefit
- The company pays Class 1A National Insurance
The amount of tax due depends on:
- The car’s list price (P11D value)
- Its CO₂ emissions
- The BIK percentage set by HMRC
This is where electric vehicles (EVs) stand out. RAC has a great guide for Electric cars and tax, read it here.
Are Electric Company Cars Still Tax-Efficient After the Latest Budget?
Following the most recent UK Budget, electric company cars remain a highly tax-efficient option in 2026, particularly when compared to petrol and diesel vehicles.
The government has confirmed that low Benefit in Kind (BIK) rates for fully electric vehicles will continue for several more years, with only gradual increases planned. While electric car BIK rates are higher than they were in earlier years, they are still significantly lower than those applied to traditional company cars, meaning electric vehicles continue to offer substantial income tax and National Insurance savings for both directors and employers.
The Budget also introduced a number of changes that businesses should be aware of when planning ahead. From April 2026, the threshold for the expensive car supplement for electric vehicles will increase, reducing additional road tax charges for higher-value electric cars. This makes premium electric models more attractive for company use.
Looking further ahead, the government has announced that new mileage-based charges for electric vehicles will be introduced from 2028. While this does not affect company car tax in 2026, it is an important consideration for long-term planning, particularly for businesses with high-mileage drivers or vehicle fleets.
Overall, electric company cars remain one of the most tax-efficient benefits available in 2026, but the gap between electric and traditional vehicles is slowly narrowing. As a result, company directors and business owners should review their position regularly to ensure their vehicle choice still aligns with their wider tax and remuneration strategy.
Benefit in Kind Rates for Electric Company Cars in 2026
Electric cars produce zero CO₂ emissions, so they attract much lower BIK rates than petrol or diesel cars.
For the 2026/27 tax year, the BIK rate for fully electric company cars is expected to remain significantly lower than for traditional vehicles, following the gradual increases already announced by HMRC.
While rates have risen slightly compared to earlier years, electric vehicles are still taxed at a fraction of the cost of petrol or diesel alternatives.
In simple terms:
Even in 2026, an electric company car usually results in much lower personal tax for the driver and lower National Insurance for the business.
Example: Electric vs Petrol Company Car (2026)
Let’s compare two company cars with a list price of £40,000:
Electric Car
- Very low BIK percentage
- Significantly lower taxable benefit
- Much smaller annual tax bill for the director
Petrol Car
- Higher CO₂ emissions
- Much higher BIK percentage
- Substantially higher income tax and Class 1A NIC
In many cases, a director driving an electric company car could pay thousands of pounds less in tax each yearcompared to a petrol or diesel equivalent.
Corporation Tax Relief on Electric Company Cars
Electric company cars also offer attractive corporation tax benefits.
In most cases, businesses can claim:
- 100% first-year capital allowances on new, fully electric cars
- Tax relief on charging equipment
- Relief on lease payments (subject to normal rules)
This can make electric vehicles particularly appealing for limited companies looking to invest efficiently.
Can a Limited Company Pay for Charging Costs?
Yes — and this is another key advantage.
A limited company can usually pay for:
- Workplace charging
- Electricity used to charge a company car at work
- Home charging costs, provided records are kept and HMRC rules are followed
In many cases, reimbursing electricity is far more tax-efficient than reimbursing fuel for petrol or diesel cars.
Are Electric Company Cars Still Worth It in 2026?
For most company directors and employees, yes — electric company cars remain one of the most tax-efficient vehicle options available.
They continue to offer:
- Lower Benefit in Kind tax
- Reduced National Insurance costs
- Generous capital allowances
- Lower running and fuel costs
However, the right choice will always depend on:
- Your income level
- How the vehicle is used
- Whether the car is bought or leased
- Your wider tax planning strategy
Get Expert Advice Before You Decide
While electric company cars are still highly tax-efficient in 2026, the rules can be complex — and small details can make a big difference to the final tax bill.
At King & Taylor, we help company directors and business owners:
- Decide whether a company car is the right option
- Compare electric vs petrol or diesel vehicles
- Ensure BIK and P11D reporting is done correctly
- Plan tax-efficient remuneration strategies
If you’re considering an electric company car in 2026, get in touch with our team for tailored advice.
