Electric company cars are still the cheapest company cars to tax, by a wide margin. The rate has nudged up this year and will keep climbing to the end of the decade, but the gap over petrol and diesel remains large. Here is exactly what an electric company car costs in tax in 2026/27, how that figure is worked out, and where the rates are heading.
What company car tax is
When your employer gives you a car you can use privately, HMRC treats it as a benefit in kind, usually shortened to BiK. You pay income tax on the value of that benefit, in the same way you would on a cash perk. So yes, an electric company car is taxed. It just sits at the bottom of the scale. In most cases the car is one your employer leases, or one you take through salary sacrifice, rather than a vehicle the business owns outright.
You do not receive a separate bill. The tax is collected through your PAYE tax code, or through payroll if your employer has moved to payrolling benefits. It comes out gradually across the year rather than in one lump.
The electric car BiK rate for 2026/27
For a fully electric car, the appropriate percentage is 4% in the 2026/27 tax year (6 April 2026 to 5 April 2027). That is up from 3% the year before. Petrol and diesel cars sit far higher, which is what makes an electric company car so cheap to tax.
How company car tax is worked out
Three numbers decide your bill:
The car's P11D value, which is its list price including options and VAT, but excluding the first-registration fee and road tax. If you pay a lump sum towards the car, a capital contribution of up to £5,000 reduces the P11D value used in the calculation.
The appropriate percentage, which is 4% for an electric car this year.
Your income tax rate, which is 20%, 40% or 45% depending on your earnings. (Scottish taxpayers have different bands, so use your own rates. The method is the same.)
The sum is simply: P11D value, times the appropriate percentage, times your income tax rate.
Take a £40,000 electric car. The taxable benefit is £40,000 at 4%, which is £1,600. A higher-rate (40%) taxpayer pays 40% of that, so £640 a year, or roughly £53 a month. A basic-rate (20%) taxpayer on the same car pays £320 a year, around £27 a month.
The percentage is the same for a used electric car, because it is set by emissions rather than age. The bill is always worked out on the car's original list price when new, so a used car is taxed on the same value it had when new. A smaller tax charge comes only from a lower original list price, which means a cheaper model or fewer options, not from buying the same car used.
How to find your car's P11D value
The P11D value is the number people are least sure of, and it is easy to get wrong, because it is not the price anyone actually pays. It is the car's list price when new: the manufacturer's price including VAT, delivery charges and any factory-fitted options, but leaving out the first-registration fee and the first year's road tax. Dealer discounts do not count, so even a keenly negotiated deal is taxed on the full list price. The value is fixed for the life of the car, which is why a used electric car is still taxed on its original list price rather than its current market value.
That makes it different from the on-the-road price you might see advertised, which is higher because it adds the registration fee and first year's road tax on top.
To find the figure for a specific car, you have a few options:
- Ask your employer or HR team. The P11D value is recorded on the benefit information your employer reports to HMRC, so they can tell you the figure being used for your car.
- Ask the dealer or your leasing provider. They can confirm the P11D value for an exact specification before you commit, which is useful when you are comparing cars.
- Build it from the price list. Start with the manufacturer's list price including VAT, add any factory options and the delivery charge, then leave out the first-registration fee and the first year's road tax.
- Check the manufacturer's website. Many carmakers have a company car tax section where you select the model and specification, and it shows the P11D value directly.
Once you have the figure, HMRC's company car tax calculator on GOV.UK will work out the tax, though you enter the car's details rather than searching for them.
Where the rates go next: 2026/27 to 2029/30
The electric car rate rises on a schedule that HMRC has already published, so you can see the whole picture before you commit to a lease. It is 4% this year, 5% in 2027/28, 7% in 2028/29, then 9% in 2029/30, where it caps.
Even at 9%, an electric company car stays well below petrol and diesel. For a driver on a typical three or four year lease, that means the tax cost is knowable for the life of the agreement, not a moving target.
Electric versus petrol and diesel: how big is the gap
Petrol and diesel cars are taxed on a rising scale that runs up to a 37% cap in 2026/27, based on their CO2 emissions. A diesel that does not meet the RDE2 standard carries a further 4% surcharge, still capped at 37%.
Put that next to the electric rate. On our £40,000 example, an electric car is taxed on £1,600 of benefit. A comparable petrol car at, say 31% would be taxed on £12,400. Same list price, very different tax bill.
What the employer pays: Class 1A National Insurance
The tax is not only a driver cost. Employers pay Class 1A National Insurance on the same benefit value, at 15% for 2026/27.
On the £40,000 electric car, that is 15% of £1,600, which is £240 a year. On a petrol equivalent taxed on £12,400, it would be £1,860. So the low electric rate cuts the employer's cost as well as the driver's.
One change to plan for: from April 2027, most benefits in kind must be payrolled rather than reported on a P11D at year end. Employers offering company cars should check their payroll software is ready for that switch.
Is an electric company car still worth it in 2026/27?
For most drivers, yes. Even with the rate rising, the tax on an electric company car is a fraction of what a similar petrol or diesel car would cost, and the rates are fixed and visible to 2029/30. So both employees and employer's know what the costs are ahead of time.
What about salary sacrifice?
Many electric company cars are taken through salary sacrifice, where you give up part of your gross pay for the car. That layers income tax and National Insurance savings on top of the already low BiK rate, which is why the combination is popular. AMT now offers a salary sacrifice scheme for electric cars, where the car is paid for from your gross salary and servicing, maintenance and road tax are bundled into one monthly account.
Company car tax when you lease the car
Company cars, and company EVs in particular, are usually provided through a business lease or a salary sacrifice arrangement rather than bought outright, so the tax works the same way but applies to a car your employer leases. One point catches people out: your BiK is based on the car's P11D list price, not your monthly lease rental. A keener lease deal lowers what is paid each month, it does not lower your tax. If you want a smaller tax bill, the lever is a lower original list price, meaning a cheaper model or fewer options. Going used is worth noting here too: it can bring the rental down, but the BiK stays the same, because the car is still taxed on its list price when new.
For the employer, a business lease carries its own tax treatment on top of the Class 1A cost, including VAT recovery and rentals set against profits.
The bottom line
The electric car BiK rate is 4% in 2026/27, rising in steps to 9% by 2029/30. Against petrol and diesel rates that reach 37%, an electric company car remains one of the most tax-efficient ways to drive, for both the employee and the employer.
If you're weighing up an electric company car, that low rate is one of the strongest reasons EVs still stack up.