For many businesses, the next step is deciding how quickly to move company cars to electric, and in what order. Company car tax still favours electric cars strongly, the government has kept its 2030 and 2035 dates for phasing out new petrol and diesel cars, and electric cars appeal to many employees because of the lower tax.
Getting the switch right takes some planning. This guide sets out the costs and tax rules that matter to an employer, how to approach charging, and how to phase an electric fleet in without disrupting the business.
Why businesses are switching their fleets to electric
The main driver is tax. An electric company car carries a much lower benefit in kind charge than a petrol or diesel car, which saves the employee income tax and saves the employer Class 1A National Insurance. Running costs are usually lower too, particularly where drivers can charge at home or at work.
Policy is moving the same way. The zero emission vehicle (ZEV) mandate requires car manufacturers to sell a rising share of zero emission cars each year. The government is reviewing how the yearly targets should work, but it has restated that new petrol and diesel cars will be phased out by 2030 and that all new cars and vans must be fully zero emission by 2035 (GOV.UK, 14 August 2026).
How much company car tax is there on an electric car?
For 2026/27 the benefit in kind rate for a zero emission company car is 4% of its list price, rising to 5% in 2027/28 (GOV.UK), then 7% in 2028/29 and 9% in 2029/30 (GOV.UK). Petrol and diesel cars sit at much higher rates, up to 37%.
For a £40,000 electric car, a higher-rate taxpayer would pay £640 in company car tax in 2026/27, rising to £1,440 in 2029/30. The employer pays Class 1A National Insurance at 15% on the same benefit, which is £240 rising to £540 a year.
The rates rise each year, but the gap with petrol and diesel stays wide. Our guide to electric company car tax in 2026/27 explains the calculation in more detail. If you want to offer electric cars to staff who don't have a company car, our post on EV salary sacrifice for employers looks at the costs and savings.
What does leasing mean for tax relief and VAT?
Many businesses lease their electric cars rather than buy them, and the tax treatment differs:
- Lease rentals. Lease payments on a car used for the business are an allowable expense. The rule that disallows 15% of lease rentals applies only to cars that emit more than 50g/km of CO2, so it doesn't affect electric cars (HMRC Business Income Manual).
- VAT. A VAT-registered business can normally reclaim 50% of the VAT on car lease rentals where there is any private use (HMRC VAT Notice 700/64). This applies to electric and petrol cars alike.
- Buying instead. A business that buys a new zero emission car outright can claim a 100% first-year allowance on expenditure up to 31 March 2027 for companies, or 5 April 2027 for income tax (GOV.UK, 26 November 2025). On a leased car, the leasing company owns the car, so the lease rental deduction applies instead.
Your accountant can show you how these compare for your business.
Are there grants for electric company cars?
The Electric Car Grant gives a discount of £1,500 or £3,750, depending on the car, on eligible new electric cars priced at £37,000 or less (GOV.UK). You don't apply for it: the dealer or manufacturer builds the discount into the price, and GOV.UK lists the eligible models. If you lease, ask how the grant has been reflected in the quote.
Some electric cars pay more vehicle tax. From 1 April 2026, a zero emission car with a list price over £50,000 pays the Expensive Car Supplement from its second year of tax, up from a £40,000 threshold before (GOV.UK). Set list price limits in your car policy with this in mind.
How should you plan charging for an electric fleet?
Charging is often the deciding factor for an electric fleet. Start by mapping where each driver will actually charge.
Charging at home
Drivers with off-street parking can usually charge overnight at the lowest cost. If they charge a company car at home, you can reimburse business mileage using HMRC's advisory electricity rate, which is reviewed each quarter.
Charging at work
Workplace chargers help drivers without a driveway and make electric cars practical for pool use. When an employer provides charging at or near the workplace, no taxable benefit arises for the electricity, as long as it isn't offered through a salary sacrifice arrangement (GOV.UK, 480 chapter 13, paragraph 13.15).
The Workplace Charging Scheme pays up to £500 per socket for installations completed from 1 April 2026, for up to 40 sockets across all sites. It's open to businesses, charities and public sector organisations until 31 March 2027 (GOV.UK Find a Grant).
Public charging
Drivers who can't charge at home or work rely on public chargers, which usually cost more. A charge card that bills the business and keeps records makes this easier to manage and audit.
What about pay-per-mile tax on electric cars?
From April 2028, electric cars are due to pay electric vehicle excise duty (eVED), a charge per mile driven, paid alongside vehicle tax. HMRC's policy paper sets it at 3p a mile for electric cars (HMRC, 13 July 2026). For high-mileage drivers this will narrow the running cost gap with petrol and diesel, so check the effect on your highest-mileage drivers when you plan. Our post on what eVED means for business cars and fleets explains how it will work for leased and company cars.
How to phase in an electric fleet
Few businesses switch every car at once. A phased plan spreads the cost and lets you learn as you go.
- Review mileage and journeys. Look at each role's typical daily mileage and longest regular trips. You may find most regular journeys sit within the range of current electric cars.
- Check where drivers will charge. Note who has off-street parking and where workplace chargers would help most.
- Replace cars as leases end. Moving each car to electric at its natural renewal avoids early termination costs.
- Update your car policy. Cover list price limits, charging, reimbursement and what happens on long trips.
- Brief drivers. Explain charging, range in cold weather and how to plan longer journeys.
For drivers with very high mileage or no access to charging, a plug-in hybrid or a later switch may suit better for now. The plan can include both.
Leasing electric cars for your business
AMT leases electric cars to businesses, and our business car leasing page explains how business contract hire works. You can browse current models on our electric car leasing page. If you're switching vans as well, our guide to company van tax covers the electric van rules.
This article is general information, not tax advice. Your accountant can confirm how the rules apply to your business. Rules and rates checked on 23 October 2026: GOV.UK appropriate percentages for 2025 to 2028 and company car tax rates 2028 to 2030; GOV.UK Electric Car Grant (15 July 2025) and eligible cars; GOV.UK Expensive Car Supplement threshold for zero emission cars; GOV.UK first-year allowances policy paper (26 November 2025); GOV.UK Find a Grant, Workplace Charging Scheme; GOV.UK 480 chapter 13; HMRC BIM47714; HMRC VAT Notice 700/64; HMRC eVED policy paper (13 July 2026); GOV.UK ZEV mandate review (14 August 2026). Tax rates can change at the Budget on 28 October 2026.