As environmental concerns continue to shape policies and consumer behaviour, businesses and individuals across the UK are increasingly transitioning to electric vehicles (EVs). 2025-26 tax year brings with it a revised framework for electric vehicle benefit charges, and understanding these changes is crucial for those looking to make informed, cost-effective decisions. Here, at Porter Garland Chartered Accountants in Camberley, Surrey, we aim to provide a comprehensive overview of the latest EV benefit charges and the implications for both employers and employees.
The Rise of EVs in the UK
The UK government has been actively promoting the adoption of electric vehicles as part of its ambitious target to achieve net-zero carbon emissions by 2050. This commitment has been supported by incentives designed to make owning and running EVs more financially viable. As more businesses consider integrating electric vehicles into their fleets, understanding the Benefit-in-Kind (BiK) tax implications is more important than ever.
What’s New in 2025-26?
From tax year 2025-26, the BiK rates for electric vehicles have undergone some adjustments. While EVs have enjoyed exceptionally low BiK rates in the past, a gradual increase is being implemented as the market matures and electric vehicles become more mainstream.
BiK Rates for EVs: The BiK rate for fully electric vehicles will start to see a slight increase. Despite this, electric cars still remain one of the most tax-efficient options for company car drivers. In the 2024-25 tax year, fully electric vehicles (EVs) will be subject to a BiK rate of 2%, rising by 1% per tax year, to 5% for the 2027-28 tax year. This is a slight increase year on year but substantially lower than the rates applied to petrol and diesel vehicles, which can be as high as 37%.
Charging Facilities: The provision of workplace charging facilities remains tax-exempt for employees. This exemption applies regardless of whether an employee charges a company car or a personal vehicle at the workplace, making it an advantageous provision for those using EVs.
Capital Allowances: Businesses purchasing new electric vehicles can benefit from favourable capital allowances. For cars with zero emissions, the First Year Allowances (FYA) are particularly attractive, allowing businesses to deduct a significant percentage of the cost from their profits before tax.
Salary Sacrifice Schemes: Salary sacrifice schemes for electric vehicles continue to offer a tax-efficient way to drive an EV. Employees can sacrifice a portion of their pre-tax salary in exchange for the use of an electric company car, leading to savings on Income Tax and National Insurance contributions.
Practical Implications for Businesses and Employees
For businesses, integrating electric vehicles into their fleet not only supports their Corporate Social Responsibility objectives but can also result in significant tax savings. However, it’s crucial to consider the total cost of ownership which includes purchase price, electricity costs and potential resale value.
Employees choosing an EV as a company car benefit from lower personal tax liabilities compared to traditional fuel vehicles. Additionally, the ongoing enhancements to the UK’s charging infrastructure are improving convenience, potentially increasing the practicality of owning an EV.
Final Thoughts and Client Feedback
While the tax benefits for electric vehicles are set to decrease slightly from 2025-26, they still offer significant advantages compared to petrol and diesel vehicles, and some hybrid vehicles too. Porter Garland recommends businesses and individuals looking to transition to electric vehicles plan ahead to fully capitalise on the available tax benefits and contribute towards a greener future.
For more detailed advice tailored to your specific circumstances, please reach out to our team.
We recently received a great testimonial from one of our clients Julie Greenwood from Leadingedj Limited. Julie asked for advice regarding electric vehicles for staff members, she said:
“Porter Garland Chartered Accountants provide a great service and the team are extremely responsive and knowledgeable. My accounts were completed and filed on time and options explained to me in terms of personal tax. I also have great advice on electric vehicles within the business – very tailored to my situation and Amanda and her team were available over the phone to talk things through which was super helpful.”