A fully electric company car is one of the most tax-efficient perks a director can still take: for the 2026/27 tax year it is taxed on a benefit-in-kind value of just 4% of the car's list price, rising to 5% in 2027/28. That is far below a petrol or diesel car, whose appropriate percentage climbs with its CO2 emissions towards a 37% maximum. You pay income tax on the benefit at your own rate, and the company pays Class 1A National Insurance at 15% on the same value. As an illustration, a £40,000 electric car at 4% gives a £1,600 taxable benefit, so a higher-rate (40%) director pays about £640 in income tax for the year. Whether an electric company car is actually worth it, though, depends on the car, your mileage and how you would otherwise pay for it — not on the tax alone.
Figures are for the 2026/27 tax year and sourced to gov.uk; company-car rates change at each Budget. General guidance, not personal tax advice — and Scottish taxpayers pay different income-tax rates on the benefit.
How is company car tax worked out?
Company car tax follows one formula: the taxable benefit equals the car's list price multiplied by an appropriate percentage set by HMRC, and you then pay income tax on that benefit at your marginal rate (gov.uk). The list price is the manufacturer's published price when new, including most optional extras and delivery — not the discounted figure you negotiate — so a specced-up car pushes the benefit up.
The appropriate percentage is where fuel type matters. It rises with a car's CO2 emissions, up to a 37% maximum for the highest-emitting cars (gov.uk). On top of the income tax you pay personally, your company pays Class 1A National Insurance at 15% on the benefit value — a cost to the business rather than to you. So two things drive the bill: the list price you choose, and the percentage your car's emissions land it on.
What's the electric company car BIK rate for 2026/27?
For a fully electric car (0 g/km of CO2), the appropriate percentage is deliberately low to encourage take-up, though it is now climbing: 3% in 2025/26, 4% in 2026/27, and 5% in 2027/28, with further rises pencilled in after that (gov.uk). Even at 4%, an electric car's benefit is a fraction of a comparable petrol model's. The table below shows why, using an illustrative £40,000 car for each; the petrol column assumes a higher-emitting model at a 30% appropriate percentage, though a petrol car's own percentage depends entirely on its CO2 emissions.
Illustrative £40,000 car (2026/27)
Electric (0 g/km)
Petrol (higher-emitting, ~30%)
Appropriate percentage
4%
~30%
Taxable benefit in kind
£1,600
£12,000
Income tax — higher-rate (40%) director
£640
£4,800
Company Class 1A NIC (15%)
£240
£1,800
First-year tax and NIC combined
£880
£6,600
Those figures are illustrative, not a quote for any particular car. On the same list price, the electric car costs a higher-rate director £640 a year against roughly £4,800 for a high-emitting petrol equivalent, and it costs the company far less in Class 1A too. That gap is the genuine attraction of an electric company car.
The car sits inside the wider question of how you draw money from your company — salary, dividends and benefits all interact. Our free guide walks through the full picture so you can see where an electric car fits before you commit to one.
Is an electric company car actually worth it for a director?
Not automatically — and this is where we tell directors to slow down. The tax on an electric company car is low, but you are still buying or funding a car, and the cheapest tax outcome is not owning one at all. An electric company car earns its place when you would run a car anyway, do meaningful business mileage, and want the company to fund it in the most tax-efficient way available. It works less well if the car mostly sits on the drive, or if a high list price means the 4% benefit — small in percentage terms — is still a large number in pounds.
How you acquire it matters as much as the rate. A company can buy the car outright, lease it, or offer it through salary sacrifice, and each has different cash-flow and tax consequences. There are also reliefs and rules around zero-emission cars — capital allowances on a company purchase, the treatment of charging, and the VED (road tax) position — that genuinely move the numbers but change from year to year. Those are exactly the points to confirm with an accountant before you commit, rather than assume. For how a company car sits alongside your salary and dividends, see our guide to how to pay yourself from a limited company.
Working out whether an electric car beats taking the same money as salary or dividends — and how best to fund it — is a numbers exercise unique to your company. Get your company-car plan checked by a partner accountant before you sign anything.
What should you check before you put a car through the company?
A few practical checks keep an electric company car on the right side of the rules and stop the tax bill surprising you. First, work from the full list price including options and delivery, because HMRC uses the published figure — a specced-up car raises the benefit even on 4%. Second, keep it a genuine company car: if it is available for private use (almost all are), the benefit in kind applies, and there is no sense pretending otherwise. Third, treat the running-cost rules — home and workplace charging, and the VED supplement that can apply to more expensive cars — as moving parts to confirm for the year you buy, not settled facts.
Above all, don't chase the tax alone. A £1,600 benefit is cheap; a £40,000 car is not, and the decision should start with whether you need the car at all. For the wider list of what a company can and can't claim, see our guide to limited company expenses; and because the car is a reportable benefit, our explainer on P11D and benefits in kind for directors covers how it lands on your year-end forms.
What does this mean for directors?
An electric company car remains one of the few genuinely tax-efficient perks left for a director — the 4% benefit for 2026/27 is proof of that. But the honest version of the advice is the one we give every time someone asks: let the car earn its place in your life first, then make it tax-efficient. Go Limited connects you with a partner accountant who can run your company-car numbers against your salary and dividends and tell you plainly whether an EV is worth it for you — you can start with our accountancy support.
Before you talk to a dealer, get the bigger picture on paying yourself tax-efficiently: the free guide puts the company car in context with everything else you draw from the business.
What is the company car tax on an electric car in 2026?
For the 2026/27 tax year, a fully electric company car (0 g/km) is taxed on a benefit in kind of 4% of its list price. You pay income tax on that at your own rate — for example, £1,600 on a £40,000 car, costing a higher-rate director about £640 — and the company pays Class 1A National Insurance at 15%. The rate rises to 5% for 2027/28.
Is an electric car worth it through a limited company?
It can be, but not automatically. The low 4% benefit makes an electric car cheaper to run through a company than a petrol equivalent, so it suits a director who needs a car and does real business mileage. It is poor value if you rarely drive or the list price is very high. Because how you fund it and the capital-allowance position both matter, it is worth having the numbers checked before you buy.
How is company car tax calculated?
The taxable benefit is the car's list price multiplied by an appropriate percentage set by HMRC, and you pay income tax on that figure at your marginal rate. The appropriate percentage rises with the car's CO2 emissions, up to a 37% maximum, which is why an electric car at 4% is taxed so much more lightly than a high-emitting petrol one. The company also pays Class 1A National Insurance at 15% on the benefit.
Do you pay tax on an electric company car?
Yes. Electric cars are no longer a tax-free company benefit — the appropriate percentage was 3% in 2025/26, is 4% in 2026/27, and moves to 5% in 2027/28. The amount is small next to a petrol car, but there is a benefit in kind to report on a P11D, plus income tax and Class 1A National Insurance to pay.
Is an electric company car cheaper than a petrol one for tax?
Yes, usually by a wide margin. On the same list price, an electric car at 4% produces a far smaller benefit than a petrol car, whose percentage climbs with its CO2 emissions towards 37%. Using an illustrative £40,000 car, the electric benefit is £1,600 against £12,000 for a petrol model at around 30% — a large difference in both your income tax and the company's National Insurance.
A fully electric company car is one of the most tax-efficient perks a director can still take: for the 2026/27 tax year it is taxed on a benefit-in-kind value of just 4% of the car's list price, rising to 5% in 2027/28. That is far below a petrol or diesel car, whose appropriate percentage climbs with its CO2 emissions towards a 37% maximum. You pay income tax on the benefit at your own rate, and the company pays Class 1A National Insurance at 15% on the same value. As an illustration, a £40,000 electric car at 4% gives a £1,600 taxable benefit, so a higher-rate (40%) director pays about £640 in income tax for the year. Whether an electric company car is actually worth it, though, depends on the car, your mileage and how you would otherwise pay for it — not on the tax alone.
Figures are for the 2026/27 tax year and sourced to gov.uk; company-car rates change at each Budget. General guidance, not personal tax advice — and Scottish taxpayers pay different income-tax rates on the benefit.
How is company car tax worked out?
Company car tax follows one formula: the taxable benefit equals the car's list price multiplied by an appropriate percentage set by HMRC, and you then pay income tax on that benefit at your marginal rate (gov.uk). The list price is the manufacturer's published price when new, including most optional extras and delivery — not the discounted figure you negotiate — so a specced-up car pushes the benefit up.
The appropriate percentage is where fuel type matters. It rises with a car's CO2 emissions, up to a 37% maximum for the highest-emitting cars (gov.uk). On top of the income tax you pay personally, your company pays Class 1A National Insurance at 15% on the benefit value — a cost to the business rather than to you. So two things drive the bill: the list price you choose, and the percentage your car's emissions land it on.
What's the electric company car BIK rate for 2026/27?
For a fully electric car (0 g/km of CO2), the appropriate percentage is deliberately low to encourage take-up, though it is now climbing: 3% in 2025/26, 4% in 2026/27, and 5% in 2027/28, with further rises pencilled in after that (gov.uk). Even at 4%, an electric car's benefit is a fraction of a comparable petrol model's. The table below shows why, using an illustrative £40,000 car for each; the petrol column assumes a higher-emitting model at a 30% appropriate percentage, though a petrol car's own percentage depends entirely on its CO2 emissions.
Illustrative £40,000 car (2026/27)
Electric (0 g/km)
Petrol (higher-emitting, ~30%)
Appropriate percentage
4%
~30%
Taxable benefit in kind
£1,600
£12,000
Income tax — higher-rate (40%) director
£640
£4,800
Company Class 1A NIC (15%)
£240
£1,800
First-year tax and NIC combined
£880
£6,600
Those figures are illustrative, not a quote for any particular car. On the same list price, the electric car costs a higher-rate director £640 a year against roughly £4,800 for a high-emitting petrol equivalent, and it costs the company far less in Class 1A too. That gap is the genuine attraction of an electric company car.
The car sits inside the wider question of how you draw money from your company — salary, dividends and benefits all interact. Our free guide walks through the full picture so you can see where an electric car fits before you commit to one.
Is an electric company car actually worth it for a director?
Not automatically — and this is where we tell directors to slow down. The tax on an electric company car is low, but you are still buying or funding a car, and the cheapest tax outcome is not owning one at all. An electric company car earns its place when you would run a car anyway, do meaningful business mileage, and want the company to fund it in the most tax-efficient way available. It works less well if the car mostly sits on the drive, or if a high list price means the 4% benefit — small in percentage terms — is still a large number in pounds.
How you acquire it matters as much as the rate. A company can buy the car outright, lease it, or offer it through salary sacrifice, and each has different cash-flow and tax consequences. There are also reliefs and rules around zero-emission cars — capital allowances on a company purchase, the treatment of charging, and the VED (road tax) position — that genuinely move the numbers but change from year to year. Those are exactly the points to confirm with an accountant before you commit, rather than assume. For how a company car sits alongside your salary and dividends, see our guide to how to pay yourself from a limited company.
Working out whether an electric car beats taking the same money as salary or dividends — and how best to fund it — is a numbers exercise unique to your company. Get your company-car plan checked by a partner accountant before you sign anything.
What should you check before you put a car through the company?
A few practical checks keep an electric company car on the right side of the rules and stop the tax bill surprising you. First, work from the full list price including options and delivery, because HMRC uses the published figure — a specced-up car raises the benefit even on 4%. Second, keep it a genuine company car: if it is available for private use (almost all are), the benefit in kind applies, and there is no sense pretending otherwise. Third, treat the running-cost rules — home and workplace charging, and the VED supplement that can apply to more expensive cars — as moving parts to confirm for the year you buy, not settled facts.
Above all, don't chase the tax alone. A £1,600 benefit is cheap; a £40,000 car is not, and the decision should start with whether you need the car at all. For the wider list of what a company can and can't claim, see our guide to limited company expenses; and because the car is a reportable benefit, our explainer on P11D and benefits in kind for directors covers how it lands on your year-end forms.
What does this mean for directors?
An electric company car remains one of the few genuinely tax-efficient perks left for a director — the 4% benefit for 2026/27 is proof of that. But the honest version of the advice is the one we give every time someone asks: let the car earn its place in your life first, then make it tax-efficient. Go Limited connects you with a partner accountant who can run your company-car numbers against your salary and dividends and tell you plainly whether an EV is worth it for you — you can start with our accountancy support.
Before you talk to a dealer, get the bigger picture on paying yourself tax-efficiently: the free guide puts the company car in context with everything else you draw from the business.
What is the company car tax on an electric car in 2026?
For the 2026/27 tax year, a fully electric company car (0 g/km) is taxed on a benefit in kind of 4% of its list price. You pay income tax on that at your own rate — for example, £1,600 on a £40,000 car, costing a higher-rate director about £640 — and the company pays Class 1A National Insurance at 15%. The rate rises to 5% for 2027/28.
Is an electric car worth it through a limited company?
It can be, but not automatically. The low 4% benefit makes an electric car cheaper to run through a company than a petrol equivalent, so it suits a director who needs a car and does real business mileage. It is poor value if you rarely drive or the list price is very high. Because how you fund it and the capital-allowance position both matter, it is worth having the numbers checked before you buy.
How is company car tax calculated?
The taxable benefit is the car's list price multiplied by an appropriate percentage set by HMRC, and you pay income tax on that figure at your marginal rate. The appropriate percentage rises with the car's CO2 emissions, up to a 37% maximum, which is why an electric car at 4% is taxed so much more lightly than a high-emitting petrol one. The company also pays Class 1A National Insurance at 15% on the benefit.
Do you pay tax on an electric company car?
Yes. Electric cars are no longer a tax-free company benefit — the appropriate percentage was 3% in 2025/26, is 4% in 2026/27, and moves to 5% in 2027/28. The amount is small next to a petrol car, but there is a benefit in kind to report on a P11D, plus income tax and Class 1A National Insurance to pay.
Is an electric company car cheaper than a petrol one for tax?
Yes, usually by a wide margin. On the same list price, an electric car at 4% produces a far smaller benefit than a petrol car, whose percentage climbs with its CO2 emissions towards 37%. Using an illustrative £40,000 car, the electric benefit is £1,600 against £12,000 for a petrol model at around 30% — a large difference in both your income tax and the company's National Insurance.
