Electric cars offer massive tax savings for company car drivers. Here's how to maximise the benefit and which EVs offer the best value.
Why EVs Are Best for Company Cars
The BIK Advantage
Benefit-in-Kind (BIK) rates for 2024/25 to 2027/28:
| Tax Year | EV BIK Rate | Petrol (130g/km) |
|---|---|---|
| 2024/25 | 2% | 30% |
| 2025/26 | 3% | 31% |
| 2026/27 | 4% | 32% |
| 2027/28 | 5% | 33% |
Even in 2027/28, EVs have 6x lower BIK than typical petrol cars.
Tax Savings Example
£45,000 car, 40% taxpayer:
| Car Type | BIK Rate | Taxable Value | Annual Tax |
|---|---|---|---|
| EV | 2% | £900 | £360 |
| Petrol | 30% | £13,500 | £5,400 |
| Saving | £5,040/year |
That's £420/month more in your pocket with an EV.
How BIK Works
The Calculation
Example
| Element | Value |
|---|---|
| P11D value | £50,000 |
| BIK rate | 2% |
| Taxable benefit | £1,000 |
| Tax (40% taxpayer) | £400/year |
| Tax (20% taxpayer) | £200/year |
Best Electric Company Cars by Category
Best Overall Value: Tesla Model 3
P11D value: ~£42,000–55,000
Range: 305–390 miles
Why it's great for company car:
| Tax Year | BIK (40% taxpayer) |
|---|---|
| 2024/25 | £336–440 |
| 2025/26 | £504–660 |
| 2026/27 | £672–880 |
Best Premium: BMW i4
P11D value: ~£52,000–65,000
Range: 287–365 miles
Why it's great for company car:
Best SUV: Hyundai Ioniq 5
P11D value: ~£45,000–55,000
Range: 240–315 miles
Why it's great for company car:
Best Lower Budget: MG4
P11D value: ~£27,000–35,000
Range: 218–323 miles
Why it's great for company car:
| Model | P11D | BIK (2%) | Tax (40%) |
|---|---|---|---|
| MG4 Standard | £27,000 | £540 | £216/year |
| MG4 Long Range | £31,000 | £620 | £248/year |
Best Executive: Mercedes EQE
P11D value: ~£75,000–95,000
Range: 340–410 miles
Why it's great for company car:
Company Car vs Personal Car
When Company Car Makes Sense
| Factor | Company Car | Personal + Allowance |
|---|---|---|
| BIK rate | 2% (EV) | N/A |
| Tax efficiency | Excellent | You pay full tax |
| Maintenance | Usually included | Your cost |
| Insurance | Usually included | Your cost |
| Depreciation | Employer's problem | Your problem |
The Calculation
Company EV vs cash allowance:
If offered £600/month cash allowance:
Plus: insurance, maintenance, and depreciation covered.
Salary Sacrifice for EVs
How It Works
Example
£50,000 salary, £45,000 EV:
| Without Sacrifice | With Sacrifice |
|---|---|
| Gross salary: £50,000 | Gross salary: £50,000 |
| Sacrifice: £0 | Sacrifice: ~£6,000 (for car) |
| Taxable: £50,000 | Taxable: £44,000 + £900 BIK |
| Take-home: ~£37,500 | Take-home: ~£36,000 |
| Car cost: You pay | Car cost: Included |
| Net benefit: | ~£5,000/year better off |
Salary sacrifice can make a £45,000 EV cost £300–400/month net.
Charging Considerations
Home Charging (Important!)
Employer-provided home charger:
Advisory Electricity Rate (AER):
Workplace Charging
Free workplace charging:
Our Top Picks by Budget
Under £35,000 P11D
| Model | P11D | Annual BIK Tax (40%) |
|---|---|---|
| MG4 Standard | £27,000 | £216 |
| BYD Dolphin | £26,000 | £208 |
| MG ZS EV | £30,000 | £240 |
£35,000–50,000 P11D
| Model | P11D | Annual BIK Tax (40%) |
|---|---|---|
| Hyundai Ioniq 5 | £45,000 | £360 |
| Tesla Model 3 | £43,000 | £344 |
| VW ID.4 | £44,000 | £352 |
£50,000–70,000 P11D
| Model | P11D | Annual BIK Tax (40%) |
|---|---|---|
| BMW i4 | £55,000 | £440 |
| Tesla Model 3 LR | £50,000 | £400 |
| Polestar 2 | £52,000 | £416 |
Over £70,000 P11D
| Model | P11D | Annual BIK Tax (40%) |
|---|---|---|
| Mercedes EQE | £80,000 | £640 |
| BMW iX | £85,000 | £680 |
| Tesla Model S | £95,000 | £760 |
Common Questions
"Should I go electric for my company car?"
Almost always yes. The tax savings are so significant that even if you have some charging inconvenience, the financial benefit outweighs it.
"What about charging on business trips?"
Employer can reimburse at 9p/mile (AER) tax-free. Rapid charging for business travel is covered.
"Do I need home charging?"
Strongly recommended but not essential. Workplace charging or regular public charging can work.
"What happens after 2028?"
BIK rates planned to 5% by 2027/28. Still far below petrol equivalents. Future rates unknown but EVs will likely remain advantageous.
Summary
| Priority | Best Company Car |
|---|---|
| Lowest tax bill | MG4 Standard (£216/year tax) |
| Best overall | Tesla Model 3 |
| Family/SUV | Hyundai Ioniq 5 |
| Premium | BMW i4 |
| Executive | Mercedes EQE |
The Bottom Line
Electric company cars are the biggest tax benefit available to employees. A £50,000 EV costs ~£30/month in tax versus ~£450/month for a petrol equivalent.
If your employer offers an EV or salary sacrifice scheme, the financial case is overwhelming. Even factoring in any charging inconvenience, you'll be thousands of pounds better off every year.