Electric company cars: 3% Benefit-in-Kind and salary sacrifice explained
For sole traders, directors and fleet managers, going electric has never made more tax sense. EVTrader explains what applies in 2026 and independently compares Business Contract Hire and salary sacrifice offers.
A fully electric company car sits in the 3% Benefit-in-Kind band for 2025/26, rising gradually to 9% by 2029/30 — against up to 37% for the highest-emission petrol/diesel cars. Since April 2025, EVs also pay Vehicle Excise Duty (£10 in year one for new cars, then £200/year). Salary sacrifice stacks on top of the low BiK rate for further savings. Business Contract Hire (BCH) remains the fleet standard. Source: gov.uk (Benefit-in-Kind and VED rates). Updated 2026-07-06.
The tax picture at a glance
Rule
Condition
EV benefit
Petrol/diesel
Benefit-in-Kind (BiK)
Fully electric company car
3% (2025/26), rising to 9% by 2029/30
Petrol/diesel: up to 37%
Vehicle Excise Duty (VED)
New EV registered from 1 Apr 2025
£10 (yr 1), then £200/yr
Same standard rate as petrol from year 2
Salary sacrifice
Employer-arranged EV scheme
Sacrifice before income tax & NI
Not available on a personal PCH/PCP
Capital allowances
New, zero-emission car bought by the business
100% first-year allowance
Petrol/diesel: written down over several years
Worth checking: tax rules change every year. Confirm the current rates on gov.uk or with your accountant. This is not tax advice.
Why Business Contract Hire dominates for fleets
Business Contract Hire turns the vehicle into a fixed monthly cost: rental, maintenance packages and breakdown cover can all sit in one payment, with no residual-value risk. Rentals are typically allowable against corporation tax under standard rules, and the fleet renews without tying up capital.
Salary sacrifice is the other big lever: employees give up gross salary for the lease cost before tax and National Insurance, and combined with the low BiK band this often makes an EV noticeably cheaper than buying privately.
EVTrader independently compares leasing companies and negotiates the best terms for the model you choose. Free, over WhatsApp — no hidden costs.
Request a quoteFree & no obligation · reply within 1 working day
FAQ
Frequently asked questions about electric business leasing
Can't find your answer? Ask us directly on WhatsApp — quick reply, free advice.
For a fully electric company car, the BiK rate is 3% for the 2025/26 tax year, rising to 4% (2026/27), 5% (2027/28), 7% (2028/29) and 9% (2029/30). This structure was confirmed unchanged through 2030 at the Autumn Budget 2025. Compare that with up to 37% for the highest-emission petrol/diesel cars. Source: gov.uk (Benefit-in-Kind and VED rates). Updated 2026-07-06.
Under a salary sacrifice scheme, your employer leases the car and you give up part of your gross salary equal to the lease cost — before income tax and National Insurance are calculated. Combined with the low BiK rate on electric cars, this typically saves 20–50% versus a personal lease, depending on your tax band. This is standard market practice; check the exact numbers with your employer's scheme provider.
Yes, since 1 April 2025. New EVs registered from that date pay £10 in the first year, then the standard rate (£200/year from 2026/27). Cars over £50,000 list price also pay the expensive car supplement (£440/year for 2026/27) for 5 years from year two.
BCH gives a fixed monthly cost with no residual-value risk: at the end of the term, the car goes back and gets replaced. Lease rentals are typically allowable against corporation tax, subject to standard rules, and fleet management stays simple.
Yes: lease payments are typically an allowable business expense, and a fully electric car bought outright can qualify for a 100% first-year capital allowance. If the car is also used privately, the low BiK rate keeps the personal tax hit small. EVTrader compares BCH and salary sacrifice offers free of charge for your situation.
You return the vehicle; excess mileage and any damage beyond fair wear and tear are charged per the contract. You then move on to a new vehicle — EVTrader re-quotes the market at every renewal.