2%

EV BIK rate 2024/25

£195

Annual VED from year 2 (from Apr 2025)

4p

Advisory electric rate per mile

EV Company Car Tax (BIK) Calculator

BIK Rates for Electric Company Cars

Benefit in Kind (BIK) tax is the tax paid by employees who receive a company car for personal use. Electric vehicles enjoy dramatically lower BIK rates than petrol or diesel cars — making them far more attractive as company car benefits.

EV BIK rate schedule

Tax yearEV BIK rateTax on £40k EV (20% taxpayer)Tax on £40k EV (40% taxpayer)
2024/252%£160/year£320/year
2025/263%£240/year£480/year
2026/274%£320/year£640/year
2027/285%£400/year£800/year
2028/297%£560/year£1,120/year

Comparison with petrol and diesel cars (2025/26)

Fuel type / CO2 emissionsBIK rate 2025/26Annual tax (£40k car, 20% taxpayer)
Electric (0g/km)3%£240
Hybrid (1–50g/km, 130+ mile range)5%£400
Hybrid (1–50g/km, 40–69 mile range)11%£880
Petrol (101–110g/km)25%£2,000
Petrol (131–145g/km)31%£2,480
Diesel (141–155g/km, surcharged)36%£2,880
Tesla Model 3 example (2025/26): List price £42,490. BIK rate 3%. BIK value = £1,275. Tax for 20% taxpayer = £255/year. Monthly tax cost = £21.25. Compare this to a BMW 3 Series diesel at 30% BIK: £42,490 x 30% x 20% = £2,549/year or £212/month — ten times more expensive in company car tax.

Vehicle Excise Duty (VED) for EVs from April 2025

From 1 April 2025, the long-standing VED exemption for electric vehicles ended. EVs now pay Vehicle Excise Duty for the first time since council tax was introduced. This was announced in the Autumn Statement 2022 to address falling tax revenues as EV adoption grew.

New EV VED rates (from 1 April 2025)

Registration dateFirst year rateAnnual rate (year 2+)Expensive car supplement
New EVs registered from 1 April 2025£10£195/year+£425/year if list price over £40,000 (years 2–6)
EVs registered 1 April 2017 – 31 March 2025N/A£195/year+£425/year if over £40,000 (years 2–6 from first reg)
EVs registered before 1 April 2017N/A£195/yearNo supplement
Expensive car supplement: Electric vehicles with a list price over £40,000 will pay an additional £425 per year supplement for years 2 through 6 after registration. This is the same rule that applies to petrol and diesel cars. Many popular EVs — including the Tesla Model 3, BMW iX, and Mercedes EQS — exceed this threshold.

VED rates in context

While the new EV VED represents a significant policy change, the rates remain low compared to high-emission petrol cars. A new petrol car emitting 131–150g/km CO2 pays £220 in year one; a car emitting over 255g/km pays £5,490 in the first year. By contrast, a new EV pays just £10 in the first year and £195 thereafter.

Salary Sacrifice for Electric Vehicles

Salary sacrifice for EVs is one of the most tax-efficient ways to drive an electric car. Because the BIK rate is so low (2–5%), the tax on the benefit is minimal, while the salary sacrifice element reduces both income tax and National Insurance contributions.

How salary sacrifice works

  1. Your employer leases an EV through a fleet provider
  2. You give up ("sacrifice") part of your salary equal to the lease cost
  3. The sacrificed amount comes from your pre-tax salary, reducing income tax and National Insurance
  4. You pay BIK tax on the car (currently just 2–5% of list price)
  5. The net cost to you can be 30–45% less than a private lease of the same car

Example: £40,000 EV on salary sacrifice

ItemAmount
Monthly lease cost (gross)£500/month
Income tax saving (40% taxpayer)-£200/month
NI saving (employee, 8%)-£40/month
BIK tax cost (3% in 2025/26, 40% taxpayer)+£40/month
Net monthly cost£300/month (40% saving)
Employer benefit: Employers also save on Employer National Insurance Contributions (15% from April 2025) on the sacrificed salary amount. This saving means many employers subsidise the scheme further, sometimes offering salary sacrifice EVs at below-market lease rates.

Home Charging & HMRC Rules

Company EV: home charging exemption

If you have a company EV and your employer pays for home charging (or reimburses your home electricity costs), this is fully exempt from income tax and National Insurance. This exemption applies specifically to electric vehicles and is a significant additional benefit over petrol company cars.

Personal EV: business mileage reimbursement

If you use your own electric car for business journeys, your employer can reimburse you at HMRC's advisory electric rate:

  • Advisory Electricity Rate: 4p per mile for company-owned EVs
  • For personal EVs used for business: standard AMAP rates apply — 45p/mile first 10,000 miles, 25p/mile thereafter
  • The difference between AMAP (45p) and actual cost can be significant for EV drivers who pay less per mile to run their car

Workplace charging

Employers can provide free workplace EV charging to employees and directors without it being treated as a taxable benefit, as long as the charge point is available to all employees (not just selected individuals). This applies even if the employee drives a personal EV, not a company car.

Capital Allowances for Business EVs

Businesses purchasing electric vehicles can claim generous capital allowances, making EV acquisition very tax-efficient for sole traders, partnerships, and limited companies.

Vehicle typeCapital allowanceRate
New zero-emission car (EV)First Year Allowance (FYA)100% in year of purchase
New car 1–50g/km CO2Main pool writing-down allowance18% per year
New car 51g/km+ CO2Special rate pool6% per year
EV charge point (new)First Year Allowance100% in year of purchase
Sole traders: If you are self-employed and purchase an EV for business use, you can claim 100% FYA for the business proportion of the cost. For example, if you use your EV 80% for business and 20% privately, you can deduct 80% of the purchase price from your taxable profits in the year of purchase.

How the Electric Vehicle Tax Guide Works

This calculator helps UK drivers estimate vehicle-related costs using current 2025/26 rates. Running a car in the UK involves numerous expenses beyond the purchase price, including road tax (VED), insurance, fuel, MOT, servicing, and depreciation. Understanding these costs helps you budget effectively and compare the true cost of different vehicles.

UK motoring costs are influenced by several factors including fuel type, CO2 emissions, vehicle age, and your location. Insurance premiums vary significantly by postcode, driving history, and vehicle group, while road tax is determined by emissions and registration date.

Key Information for 2025/26

Vehicle Excise Duty (VED) standard rate is £195 per year for most vehicles registered from April 2017 onwards, including electric vehicles from April 2025. Petrol costs approximately £1.40 per litre and diesel £1.48 per litre. The luxury car supplement (£425/year for vehicles over £40,000 list price) applies for years 2-6. MOT costs up to £54.85 for a car.

Example Calculation

A petrol car doing 10,000 miles per year at 40 mpg uses approximately 1,136 litres of fuel, costing around £1,590 per year. Adding road tax (£195), insurance (£600 average), MOT and servicing (£350), the total annual running cost is approximately £2,735, or £228 per month.

Source: Based on current DVLA and UK fuel price data. Last updated March 2026.

Frequently Asked Questions

What is the BIK rate for electric company cars in 2025?
The Benefit in Kind (BIK) rate for fully electric company cars is 2% in 2024/25 and rises to 3% in 2025/26. This rate applies to the P11D value (list price including options) of the car. For a £40,000 EV in 2025/26, the taxable BIK value is £1,200. A basic rate (20%) taxpayer would pay £240/year in income tax. A higher rate (40%) taxpayer would pay £480/year. The rate rises gradually to 5% by 2027/28.
Do electric cars pay Vehicle Excise Duty (VED) from April 2025?
Yes. From 1 April 2025, fully electric vehicles are no longer exempt from VED (road tax). New EVs registered on or after this date pay a first-year rate of £10 and then £195 per year from year two. EVs registered between 1 April 2017 and 31 March 2025 started paying £195 per year from April 2025. EVs with a list price over £40,000 also pay a £425 expensive car supplement for years 2–6.
What is salary sacrifice for EVs and how much can I save?
Salary sacrifice for EVs allows employees to lease an electric vehicle through their employer, paying for it from pre-tax salary. The sacrificed salary is exempt from income tax and National Insurance. Because the BIK rate on EVs is very low (2–3%), the net tax cost of the BIK is small. A higher rate (40%) taxpayer can typically save 35–45% on the gross lease cost compared to a private lease, depending on the car and scheme terms.
What is the approved mileage rate for EVs?
For employees using their own electric vehicle for business journeys, HMRC's Approved Mileage Allowance Payment (AMAP) rates are: 45p per mile for the first 10,000 miles per year, then 25p per mile. These are the same rates as for petrol and diesel cars. For company-owned EVs, the advisory electricity rate is 4p per mile. Note that the 4p advisory rate is specifically for reimbursing the fuel cost element of company car running costs, not for personal EVs on business travel.
Is home EV charging tax-free?
Yes, if your employer pays for or reimburses home charging costs for a company-owned electric car or van, this is exempt from income tax and National Insurance — you pay no benefit in kind on the charging electricity. Separately, employers can offer workplace charging facilities to all employees without it being a taxable benefit, even for employees' personal EVs. However, if you receive reimbursement for home charging of a personal EV above the AMAP rates, the excess may be taxable.
What capital allowances are available for business EVs?
Businesses purchasing new zero-emission electric vehicles can claim a 100% First Year Allowance (FYA), meaning the full cost of the EV can be deducted from taxable profits in the year of purchase. This compares to an 18% writing-down allowance for low-emission cars (1–50g/km) and only 6% for higher-emission vehicles. The 100% FYA also applies to electric charge points. This is currently available until April 2026, when it is set to be reviewed.
How does company car tax compare for EVs vs petrol cars?
The tax difference is very large. A petrol car at 30% BIK with a £40,000 list price creates a BIK value of £12,000 and annual income tax of £2,400 for a 20% taxpayer or £4,800 for a 40% taxpayer. The equivalent EV at 3% BIK creates a BIK value of £1,200 and annual tax of £240 (20%) or £480 (40%). This represents an annual saving of over £2,000 for a basic rate taxpayer and over £4,000 for a higher rate taxpayer on the same value car.