April 30, 2020
Updated 1 April 2025
Electric cars have become a very popular company car option due to their low Benefit in Kind (BiK) rates. Driving an EV is becoming more accessible every year, with longer range models becoming available and a rapidly growing public charging network across the UK. Therefore, choosing an electric car is a cost-effective and practical option when selecting and running a new company car.
Company car drivers must pay tax on the “Benefit in Kind” of driving a company car for personal use. This is often referred to as “company car tax”. BiK rates are set based on the car’s emissions – the lower the emissions, the lower the rate. Currently, the BiK rate for a fully electric car is 3%, while the rate for a high-emission petrol or diesel could be as much as 37%. As a result, there is a significant tax benefits for choosing an electric car.
If you are thinking of choosing an electric car, or researching if one will work for your lifestyle, read on to learn how the tax is calculated.
Company car tax for electric cars
In 2019, the Government announced that company cars producing no CO2 emissions would attract a zero percent Benefit in Kind tax rate from April 2020. Therefore, drivers paid no company car tax on a pure electric car for the 2020/21 tax year.
However, the BiK rate for electric cars raised to 1% in the 2021/22 tax year and increased again to 2% in the 2022/23 tax year. The BiK rate for electric cars remained at 2% until 2025/26.
As of April 2025, the BiK rate for fully electric cars is 3%. This will continue to rise by 1% every year until at least the 2029/30 tax year.
What is the tax on electric cars?
The table below shows the BiK tax tables for cars, based on CO2 emissions, from the current 2025/26 tax year until 2029/30.
| CO2 (g/km) | Electric range (miles) | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 2029/30 |
|---|---|---|---|---|---|---|
| 0 | N/A | 3% | 4% | 5% | 7% | 9% |
| 1-50 | >130 | 3% | 4% | 5% | 18% | 19% |
| 1-50 | 70-129 | 6% | 7% | 8% | 18% | 19% |
| 1-50 | 40-69 | 9% | 10% | 11% | 18% | 19% |
| 1-50 | 30-39 | 13% | 14% | 15% | 18% | 19% |
| 1-50 | <30 | 15% | 16% | 17% | 18% | 19% |
| 51-54 | 16% | 17% | 18% | 19% | 20% | |
| 55-59 | 17% | 18% | 19% | 20% | 21% | |
| 60-64 | 18% | 19% | 20% | 21% | 22% | |
| 65-69 | 19% | 20% | 21% | 22% | 23% | |
| 70-74 | 20% | 21% | 21% | 22% | 23% | |
| 75-79 | 21% | 21% | 21% | 22% | 23% | |
| 80-84 | 22% | 22% | 22% | 23% | 24% | |
| 85-89 | 23% | 23% | 23% | 24% | 25% | |
| 90-94 | 24% | 24% | 24% | 25% | 26% | |
| 95-99 | 25% | 25% | 25% | 26% | 27% | |
| 100-104 | 26% | 26% | 26% | 27% | 28% | |
| 105-109 | 27% | 27% | 27% | 28% | 29% | |
| 110-114 | 28% | 28% | 28% | 29% | 30% | |
| 115-119 | 29% | 29% | 29% | 30% | 31% | |
| 120-124 | 30% | 30% | 30% | 31% | 32% | |
| 125-129 | 31% | 31% | 31% | 32% | 33% | |
| 130-134 | 32% | 32% | 32% | 33% | 34% | |
| 135-139 | 33% | 33% | 33% | 34% | 35% | |
| 140-144 | 34% | 34% | 34% | 35% | 36% | |
| 145-149 | 35% | 35% | 35% | 36% | 37% | |
| 150-154 | 36% | 36% | 36% | 37% | 38% | |
| 155-159 | 37% | 37% | 37% | 38% | 39% | |
| 160-164 | 37% | 37% | 37% | 38% | 39% | |
| 165-169 | 37% | 37% | 37% | 38% | 39% | |
| 170+ | 37% | 37% | 37% | 38% | 39% |
Diesel cars will continue to be subject to the 4% premium on the above rates, but those meeting the latest RDE2 rules on nitrogen oxide emissions will be exempt from this.
From an individual taxation liability perspective, someone that choices an electric vehicle over a combustion-engine equivalent will be subject to much less tax than they would otherwise. If an electric vehicle would suit an individual, and they could be selected from a company car choice list, then it makes the most financial sense to choose one.
Examples of electric car tax benefits
Here are some illustrations to compare the electric car benefit in kind to a similar diesel equivalent.
The illustrations show that electric cars have a much more advantageous tax treatment.
Battery only or Hybrid?
The availability of hybrid powertrains has given drivers and companies the chance to select lower-emission vehicles without being limited by the perceived constraints of battery only, such as electric range and charging infrastructure.
From a BiK tax perspective though, selecting a hybrid doesn’t maximise a driver’s tax position.
The electric vehicle numbers add up
Electric vehicles have been available for a number of years now and adoption has been growing, the government is clearly focused on encouraging more drivers into electric and away from petrol and diesel.
From a choice perspective, the range of cars available from vehicle manufacturers is increasing and electric range, i.e. the distance that they will travel on a single charge is increasing all the time too. From a charging perspective, the infrastructure available is also increasing and improving all the time.
Electric vehicles are becoming a practical option for more drivers than ever before. For company drivers that want to select an electric car, the taxation treatment of them will encourage more companies to add them to their choice lists.