Electric Company Cars – Still a Tax-Efficient Benefit in 2025 and Beyond?

Electric cars have been one of the few “perks” left standing for business owners over the past few years, and they’ve had some really attractive tax incentives too. But with the rules changing again from 2025, it’s a good time to look at where things stand now, what’s coming next, and what business owners (especially those tempted by TikTok tips) need to watch out for.

⚡ Electric Cars & Tax – What’s Still Good?

Even with some upcoming tweaks, electric company cars still offer major tax advantages for both directors and companies. Here’s the current position and what’s coming:

✅ Benefit-in-Kind (BIK) Tax – Still Low

• For 2024/25, electric company cars are taxed at just 2% of the list price.

• From April 2025, the BIK rate for electric vehicles will rise gradually:

  • 2025/26: 3%

  • 2026/27: 4%

  • 2027/28: 5%

👉 So yes, it’s increasing - but compare that to petrol or diesel cars taxed at up to 37%, and it’s still a huge saving.

Example:
A £30,000 electric car would trigger a BIK charge of just £600 in 2027/28 for a higher-rate taxpayer - that’s £50 a month in personal tax.

✅ Claiming Capital Allowances

Companies can still claim 100% First Year Allowance (FYA) on new electric vehicles and charge points until March 2026. That means the full cost of the car can be offset against corporation tax in the year of purchase.

✅ No Fuel Benefit Charge

Electricity isn’t classed as “fuel” by HMRC. So:

• If the company pays for charging at home or work = no fuel benefit charge.

• If the employee charges their car at a workplace charger = no tax.

🚗 Business Mileage – What You Need to Know

We know mileage rules can be confusing, so here’s the super simple version:

👉 If the car belongs to the business (e.g. leased or owned by the company):

• You get 7p per mile for business trips.

• This covers electricity and is tax-free.

• (We’ll make sure it’s claimed correctly for you.)

👉 If the car is personally owned (in your name):

• You get 45p per mile for the first 10,000 miles, then 25p after that.

• This covers everything — electricity, wear and tear, etc.

• (Again, we’ll sort the claim for you.)

❌ Important:

• Commuting (home to work) is not business travel — HMRC always counts it as personal use.

😬 TikTok Myths & Too-Good-To-Be-True Advice

There’s no shortage of finance influencers shouting that you can “write off a Tesla through your limited company and pay no tax!” Sounds lovely. But it’s not quite the full picture.

Here’s what they don’t mention:

• Yes, the company can claim 100% of the car cost (if purchased).

• But if you’re driving it personally (even a little), you’ll pay benefit-in-kind tax.

• On top of that, the company pays Class 1A National Insurance on the benefit.

• Oh — and let’s not forget all the usual suspects: Corporation Tax, VAT, PAYE, National Insurance, and more.

So yes, it can be tax-efficient — but it’s not tax-free.

We’re not here to slay other accountants (honestly, we like most of them), but we do worry about misleading advice doing the rounds. Always get proper advice from someone who actually reads the HMRC manuals, not just the comments section.

🚗 New Electric Cars to Watch in 2025/26

If you're thinking about making the switch or adding to your fleet, here are a few EVs generating buzz in the business world:

• Volvo EX60 – Premium SUV launching early 2026, 400+ mile range

• Volkswagen ID.2 – Affordable hatchback with 280-mile range

• BYD Seagull – Budget EV with a £12,500 price tag and 260-mile range

• Nissan Micra EV – New design, built on the Renault 5 platform

Whether you want something eco-luxury or budget-conscious, there’s plenty to choose from.

🔮 Looking Ahead

The government is slowly dialling back EV tax incentives as adoption grows. But even with higher BIK rates and Vehicle Excise Duty (VED) for EVs coming in from April 2025, electric company cars remain one of the most tax-efficient benefits available to directors and employees.

Just make sure you know the full story, not just the TikTok version.

If you’ve questions or need help running the numbers for your business, we’re always happy to chat over a proper cup of tea and without any fluff.