Company car tax on a fully electric car is calculated using the same Benefit-in-Kind (BIK) formula as any other company car, but the rate is far lower. In 2026/27, the BIK rate for zero-emission cars is 4%. For a 40% taxpayer in a £40,000 electric car, that means around £53 per month in tax — a fraction of what they would pay in a petrol equivalent.
This guide explains how company car tax on electric cars works, walks through worked examples at different salary levels and car values, and shows how the numbers change through to 2029/30.
Key Takeaways
- Company car tax on an electric car is calculated as: P11D value × 4% (2026/27) × your income tax rate.
- A higher-rate taxpayer (40%) in a £45,000 EV pays around £60 per month in BIK tax in 2026/27.
- The same person in a comparable petrol car at 30% BIK would pay around £450 per month.
- BIK rates for electric cars rise to 5% (2027/28), 7% (2028/29), and 9% (2029/30) — still far below petrol rates.
- Salary sacrifice can reduce the net cost further by using pre-tax salary to fund the lease.
How Company Car Tax on Electric Cars Works
When your employer provides a company car, HMRC treats it as a taxable benefit. The amount of benefit is calculated using the car’s P11D value and the BIK appropriate percentage for that vehicle type.
The formula:
Annual company car tax = P11D value × BIK% × income tax rate
Monthly company car tax = annual figure ÷ 12For electric cars, the BIK percentage in 2026/27 is 4%. This is confirmed by GOV.UK (Appendix 2, company car appropriate percentages) and should be verified at publish time.
What Is the P11D Value?
The P11D value is the car’s list price including factory options and delivery, but excluding:
- Vehicle Excise Duty (VED/road tax)
- First registration fee
It is set at the point of registration and does not fall as the car ages, even if its market value drops significantly.
BIK Rate Table for Electric Cars: 2025/26 to 2029/30
| Tax year | Zero-emission BIK rate |
|---|---|
| 2025/26 | 3% |
| 2026/27 | 4% |
| 2027/28 | 5% |
| 2028/29 | 7% |
| 2029/30 | 9% |
Source: GOV.UK. Verify before publishing.
Worked Example 1: £35,000 Electric Car
Vehicle: popular mid-range electric hatchback or SUV P11D value: £35,000 Tax year: 2026/27 (BIK rate: 4%)
| Taxpayer | Calculation | Annual BIK tax | Monthly BIK tax |
|---|---|---|---|
| Basic rate (20%) | £35,000 × 4% × 20% | £280 | £23 |
| Higher rate (40%) | £35,000 × 4% × 40% | £560 | £47 |
| Additional rate (45%) | £35,000 × 4% × 45% | £630 | £53 |
Worked Example 2: £48,000 Electric Car
Vehicle: executive-segment electric saloon or estate P11D value: £48,000 Tax year: 2026/27 (BIK rate: 4%)
| Taxpayer | Annual BIK tax | Monthly BIK tax |
|---|---|---|
| Basic rate (20%) | £384 | £32 |
| Higher rate (40%) | £768 | £64 |
| Additional rate (45%) | £864 | £72 |
Worked Example 3: How BIK Tax Grows Year by Year
Vehicle: £45,000 P11D value electric car Taxpayer: higher rate (40%)
| Tax year | BIK rate | Annual BIK tax | Monthly BIK tax |
|---|---|---|---|
| 2025/26 | 3% | £540 | £45 |
| 2026/27 | 4% | £720 | £60 |
| 2027/28 | 5% | £900 | £75 |
| 2028/29 | 7% | £1,260 | £105 |
| 2029/30 | 9% | £1,620 | £135 |
Even at the maximum confirmed rate of 9% in 2029/30, a 40% taxpayer in a £45,000 electric car pays £135 per month in company car tax.
Worked Example 4: Electric vs Petrol Side by Side
Taxpayer: higher rate (40%), 2026/27 tax year
| Vehicle | P11D value | BIK rate | Annual tax | Monthly tax |
|---|---|---|---|---|
| Electric car | £45,000 | 4% | £720 | £60 |
| Efficient petrol (100g CO2) | £38,000 | 25% | £3,800 | £317 |
| Average petrol (130g CO2) | £35,000 | 30% | £4,200 | £350 |
| High-emission petrol (160g CO2) | £32,000 | 37% | £4,736 | £395 |
The monthly saving of switching from an average petrol company car to an electric one is more than £290, even accounting for the electric car’s higher P11D value.
How BIK Tax Is Collected
You do not receive a separate bill for company car tax. HMRC adjusts your PAYE tax code to account for the taxable benefit. This reduces your personal allowance by the value of the benefit, which means you pay more income tax each month through your payslip.
Your employer reports the car benefit to HMRC via P11D forms at the end of each tax year (or real-time via payrolling of benefits), and HMRC issues a revised tax code accordingly. If you start or stop using a company car mid-year, your employer must notify HMRC so the tax code is adjusted from the correct date.
Can You Reduce Your Company Car Tax?
1. Choose a lower P11D vehicle
The P11D value is fixed for the life of the vehicle, so choosing a car at a lower list price (or avoiding expensive options) directly reduces your annual BIK charge.
2. Make a capital contribution
If you contribute towards the cost of the car (up to £5,000 is deductible from the P11D value), your BIK charge reduces accordingly. For example, a £2,000 contribution on a £45,000 car reduces the P11D to £43,000 for BIK purposes.
3. Switch to salary sacrifice
With a salary sacrifice electric car scheme, you give up gross salary in exchange for an electric car lease. The BIK charge still applies, but the income tax and National Insurance savings on the sacrificed salary portion offset a significant part of the cost. For many employees, the net monthly cost is lower than with a conventional company car arrangement.
Find out how salary sacrifice could work for you: salary sacrifice electric car guide.
What About Fuel Benefit?
If your employer pays for private fuel in your electric car, a separate benefit charge applies. For 2026/27, the car fuel benefit multiplier is £29,200. This is multiplied by the car’s BIK percentage to give the taxable fuel benefit.
For most electric car drivers who charge at home or at public charge points, this benefit does not apply because electricity is not classified as “fuel” for company car fuel benefit purposes. Your employer can reimburse business electricity costs at the HMRC Advisory Electric Rate (7p per mile for home charging, 15p per mile for public charging, from 1 March 2026) without creating a taxable fuel benefit.
Frequently Asked Questions
How is company car tax calculated on an electric car? Multiply the car’s P11D value by the BIK appropriate percentage for zero-emission cars (4% in 2026/27) and then by your income tax rate. Divide by 12 for the monthly figure. A £40,000 EV at 4% for a 40% taxpayer costs £640 per year, or around £53 per month.
Will my company car tax increase each year on the same electric car? Yes. The BIK percentage rises each tax year: 4% (2026/27), 5% (2027/28), 7% (2028/29), 9% (2029/30). The P11D value stays fixed, so your annual BIK charge increases in line with the rising rate, not the car’s age or depreciation.
Is there a BIK charge on a salary sacrifice electric car? Yes. BIK applies to any car provided by an employer, including salary sacrifice vehicles. However, the tax and NI savings on the sacrificed salary typically more than offset the BIK charge at current rates.
Can I reduce my P11D value by contributing towards the car? Yes. Capital contributions up to £5,000 are deducted from the P11D value for BIK purposes, reducing your annual charge. If you contribute £2,000 to a £45,000 car, your BIK is calculated on £43,000 instead.