Electric cars are still the standout tax play in UK remuneration — a company-provided EV is taxed at 4% of list price in 2026/27 against up to 37% for petrol and diesel — but the golden era is being wound down on a published schedule. The benefit rate rises every year to 9% by 2029/30, VED now applies, and from April 2028 EVs pay a new per-mile charge. The planning question has shifted from "should we do this" to "how much of the remaining advantage can we lock in, and for how long".
Here is the full 2026/27 picture — company cars, salary sacrifice, capital allowances, and the charges arriving down the road.
Company car tax: 4% now, 9% by decade's end
The benefit-in-kind rate for zero-emission cars is 4% of list price this year, then 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. Concretely: a £40,000 EV creates a £1,600 taxable benefit, costing a higher-rate driver £640 a year — about £53 a month — while the same money spent on a high-emission petrol car at 37% costs £5,920 a year. Even at 2029/30 rates the EV stays at roughly a quarter of the petrol equivalent — and note the rates are annual, not fixed by order date: a lease running 2026–2029 is taxed at 4%, then 5%, then 7% as each tax year's rate applies, so an earlier start simply means more of the lease spent in the cheaper years.
Plug-in hybrids deserve a hard look before ordering: rates currently step by electric range (7% for 70–129 miles, up to 16% for short-range models), but from 2028/29 all 1–50g/km hybrids jump to a flat 18%. A PHEV delivered on a four-year cycle today will live through that cliff-edge; drivers and fleet managers signing now should price it in. The rate tables live in HMRC's Appendix 2.
Salary sacrifice: the mechanism that makes EVs cheap
EV salary sacrifice works because electric cars sit outside the anti-avoidance rules that killed most benefit sacrifices in 2017 — cars at or below 75g/km are exempt, so the employee is taxed on the small benefit rather than the salary given up. Run the full arithmetic on a £600-a-month sacrifice for a £40,000 EV, assuming the whole sacrifice falls in the higher-rate band: take-home pay falls by £348 (the £600 less £240 income tax and £12 NIC saved), plus £53 a month of benefit charge — a true cost of about £401 a month for the car, insurance and maintenance typically bundled in. A basic-rate employee saves 20% plus 8% NIC on the sacrifice instead, so their net cost is a little higher. Employers save 15% employer NIC on the sacrificed pay, offset by 15% Class 1A on the (small) benefit value — in practice, schemes are near cost-neutral or better for the employer while delivering employees a car materially cheaper than any personal lease.
Two footnotes from the compliance side. Sacrifice can never take pay below the minimum wage — £12.71 an hour from April 2026 — and every April rise silently pulls the lowest-paid scheme members toward that line; run the check before enrolment and at each rate change (our NMW guide covers why HMRC treats this harshly). And watch the horizon: the government has already legislated a £2,000 cap on pension salary sacrifice from 2029, which tells you how this Treasury views sacrifice arrangements generally. The EV carve-out survives today; nobody should assume it is eternal.
For the business: 100% deduction in year one
Companies buying new zero-emission cars get a 100% first-year allowance — the full cost against profits immediately — currently legislated to 31 March 2027 for corporation tax. Used EVs get only 14% writing-down allowances (the main rate, cut from 18% in April 2026), a distinction that surprises buyers of nearly-new stock. Charging equipment gets its own 100% first-year allowance on the same timetable, and new, unused electric vans bought by companies are plant and machinery, covered by permanent full expensing without any expiry drama.
For a profitable company weighing an EV purchase, the FYA deadline is a genuine date to plan around: a £50,000 car bought before April 2027 is a £12,500 corporation tax saving in year one at the main rate.
Charging: mostly still free of tax
The charging rules remain generous. Workplace charging creates no benefit at all — including for employees' own cars — where it is available to staff generally. An employer paying to install a home charger for a company car driver creates no benefit either. For running costs, employers can either reimburse the actual electricity cost of business (or even all) charging of a company car, or simply pay the advisory electric rate — 7p a mile for home charging, 15p for public charging (a blended public-network figure — drivers living on rapid chargers may find even 15p light, and evidenced actual costs remain an alternative) from 1 September 2026 — the split rate finally reflecting that motorway charging costs double home rates.
The other side of the ledger: VED and the coming per-mile charge
The free ride on road tax ended in 2025: new EVs now pay a £10 first-year rate and the £200 standard rate thereafter, and the expensive-car supplement (£440 a year for years two to six) applies above a threshold that was raised to £50,000 for EVs from April 2026 — sparing the £40–50k mainstream models that briefly fell into it.
The bigger structural change is eVED from April 2028: a per-mile charge of 3p for EVs (1.5p for plug-in hybrids) on top of standard VED, confirmed after consultation in mid-2026 though with detail still capable of shifting before legislation completes. At 10,000 miles a year that is £300 — modest against the BiK savings, but a sign of where policy is heading as fuel duty revenue evaporates. Fleet models built on 2022 assumptions deserve a refresh with all of this in them.
Putting it together
For 2026/27 the ranking is broadly unchanged: a company EV via salary sacrifice is very often the cheapest route to a new car for employees — worth confirming against a personal-lease quote for your actual car and tax band — and the 100% FYA makes outright company purchase compelling where cash allows. What has changed is the value of acting early — every year of delay buys a higher BiK rate, and the FYA clock runs to spring 2027. Our employment tax team designs and health-checks EV schemes, and the mileage rates guide covers the reimbursement mechanics for everything else on four wheels.