Calculate the Benefit in Kind tax saving of choosing an electric company car vs petrol or diesel. Find the exact employee tax saving and employer NI reduction.
Electric company cars have a BiK percentage of just 2% in 2025/26 (rising to 3% in 2026/27 and 4% in 2027/28). A petrol car with 130g/km CO₂ has a BiK of around 27%. This means the annual employee tax cost on a £40,000 EV is just £240 (at 20% tax) versus £2,160 on an equivalent petrol car — a saving of £1,920/year.
Yes — the employer pays Class 1A NI (13.8%) on the P11D value multiplied by the BiK percentage. A £40,000 EV at 2% BiK costs the employer just £110.40/year in NI, versus £1,490.40 for a petrol car at 27%. This employer NI saving often encourages businesses to offer EVs to employees through salary sacrifice or company car schemes.
Yes — electric cars through salary sacrifice are exceptionally tax-efficient. The employee gives up salary equal to the lease cost (avoiding income tax and NI on that salary), and the BiK tax of just 2% on the EV replaces the NI/tax saved. For many employees, an EV on salary sacrifice effectively costs less than a personal lease, as the combined tax and NI savings exceed the BiK cost.
Yes — in addition to tax savings, EVs typically cost 2-4p/mile in electricity versus 12-18p/mile in fuel for petrol cars. HMRC's Advisory Electric Rate (AER) for reimbursement is currently 7p/mile. EV servicing costs are also lower (no oil changes, fewer moving parts). However, the higher purchase/lease cost partially offsets these savings.
HMRC has confirmed rising BiK rates for electric vehicles: 2025/26: 3%, 2026/27: 4%, 2027/28: 5%, rising by 1% per year until reaching 21% by 2028 (long-term target aligning more closely with low-emission petrol cars). Despite the rises, EVs will remain significantly cheaper for BiK tax than petrol/diesel cars for many years, maintaining the incentive to choose electric company cars.