Electric car BIK in 2026/27: rates to 2029/30, worked examples and what home charging changes

The benefit-in-kind (BIK) rate on a fully electric company car is 4% of the list price in 2026/27, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. On a £40,000 electric car, a higher-rate taxpayer pays about £53 a month in company car tax this year, against roughly £400 a month for a comparable petrol car.

This guide gives the full appropriate percentage tables (electric, plug-in hybrid and petrol), the calculation step by step with examples for each UK and Scottish tax band, the employer's Class 1A National Insurance, the switch to payrolled benefits from April 2027, salary sacrifice, pool cars and the 2029/30 outlook. It also answers the question drivers ask most: does home electricity paid by the employer add to the BIK? It does not, and that is where Voltaback fits, by letting the employer pay that electricity tax-free with evidence.

What is company car benefit in kind?

When an employer makes a car available to an employee for private use, the private use is a taxable benefit. Commuting counts as private use. The taxable value, called the cash equivalent, is set by a formula in sections 121 to 148 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), and is taxed at the employee's marginal income tax rate.

Three people are affected:

• the driver, who pays income tax on the cash equivalent, through their tax code or, from April 2027, through payroll;
• the employer, who pays Class 1A National Insurance at 15% on the same amount;
• the finance team, which must report the benefit correctly and on time.

The amount does not depend on how far the car is driven, how much private use there is, or what the car costs to run. It depends on three things: the list price, the CO2 emissions (and, for plug-in hybrids, the electric range) and the tax year.

Electric car BIK rates from 2025/26 to 2029/30

Zero-emission cars

The rates to 2027/28 were legislated in Finance Act 2023. The rises of 2 percentage points a year in 2028/29 and 2029/30 were announced at Autumn Budget 2024 and take effect from 6 April 2028.

Plug-in hybrids (1 to 50 g/km)

Until 2027/28, plug-in hybrids are banded by their zero-emission range. From 2028/29 the range bands disappear: every car at 1 to 50 g/km pays a flat rate.

The 2027/28 figures follow the Finance Act 2023 rule of a further 1 percentage point for cars under 75 g/km.

The 2028/29 cliff is the key number for car policies. A typical plug-in hybrid with 40 to 69 miles of range goes from 10% today to 18% in April 2028. On a four-year lease signed now, the last two years carry nearly double the tax.

A temporary easement applies to plug-in hybrids first registered from 1 January 2025: for company car tax, their CO2 figure is deemed to be 1 g/km if they meet HMRC's conditions, to avoid a jump in BIK caused by the Euro 6e-bis emissions test.

Petrol and diesel for comparison

In 2026/27, petrol cars pay from 17% (51 to 54 g/km) to 37% (155 g/km and above). A typical 120 to 124 g/km petrol car pays 30%. Diesel cars that do not meet the RDE2 standard add a 4% supplement, up to the 37% cap. From 2028/29, these bands rise by 1 point a year, to a maximum of 38% and then 39%.

Sources: HMRC EIM24705, appropriate percentages, GOV.UK policy paper, appropriate percentages 2025/26 to 2027/28, GOV.UK policy paper, appropriate percentages 2028/29 and 2029/30, HMRC EIM24710, PHEV easement.

How to calculate electric car BIK, step by step

1. Start with the list price (often called the P11D value): the manufacturer's price for the car on the day before first registration, including VAT and delivery, plus optional accessories fitted. First registration fee and Vehicle Excise Duty are excluded. If the battery is leased separately, its cost is still part of the list price, because the car cannot run without it.
2. Deduct any capital contribution the employee made towards the car or its accessories, up to £5,000.
3. Multiply by the appropriate percentage for the car's CO2 and the tax year: 4% for an electric car in 2026/27.
4. Adjust for availability: if the car was available for only part of the year, or unavailable for 30 consecutive days or more, reduce proportionally.
5. Deduct any payment the employee is required to make for private use, if it is paid by the deadline.
6. The result is the cash equivalent. Multiply by the driver's marginal income tax rate to get the tax, and by 15% for the employer's Class 1A NIC.

Source: GOV.UK, Tax on company benefits: company cars.

What counts in the list price, and what does not

A driver who chooses the larger battery or the premium trim pays BIK on the extra list price for the whole life of the car, even if the fleet negotiated a discount.

Example: car replaced mid-year

A higher-rate taxpayer drives a £38,000 electric car from 6 April to 31 October 2026 (209 days), then a £52,000 electric car from 1 November 2026 to 5 April 2027 (156 days).

• First car: £38,000 x 4% x 209/365 = £870
• Second car: £52,000 x 4% x 156/365 = £889
• Total cash equivalent: £1,759, so £704 of income tax and £264 of Class 1A NIC.

If the second car was not available on delivery day because of a delay, only the days it was actually available count. Under payrolled benefits from April 2027, the change shows on the November payslip rather than in a tax code adjustment the following year.

Worked examples: £40,000 and £60,000 electric cars in 2026/27

England, Wales and Northern Ireland

Income tax rates for 2026/27: 20% basic rate (£12,571 to £50,270), 40% higher rate (£50,271 to £125,140), 45% additional rate above £125,140.

Scotland

Scottish taxpayers apply Scottish rates in 2026/27: 19% starter, 20% basic, 21% intermediate (£29,527 to £43,662), 42% higher (£43,663 to £75,000), 45% advanced (£75,001 to £125,140) and 48% top rate.

The employer's Class 1A NIC is the same everywhere in the UK: 15% of the cash equivalent.

Sources: GOV.UK, Income Tax rates, GOV.UK, Income Tax in Scotland, GOV.UK, Rates and thresholds for employers 2026 to 2027.

Electric versus plug-in hybrid versus petrol

Same £40,000 list price, higher-rate taxpayer, 2026/27:

The electric car saves this driver £4,160 a year of income tax compared with the petrol car, and the employer £1,560 of NIC. Before any fuel benefit charge on the petrol car, which the next sections explain.

The four-year view: what a car chosen today will cost to 2029/30

A car picked in 2026 is often kept until 2030. The BIK changes every April, so the decision should look at the whole period.

£40,000 list price, higher-rate taxpayer:

The electric car costs the driver £5,280 less over four years. Even at 9%, it remains far below any petrol car, whose bands rise to 32% for a 120 g/km car by 2029/30. What the 2029/30 rise changes is the gap with a car allowance: at 9%, a £60,000 EV costs a higher-rate taxpayer £2,160 a year, which some employees will compare with taking cash and running their own car on mileage allowances.

Does charging at home add to the BIK?

No. For a company car, electricity is not "fuel" for the car fuel benefit charge, and section 239(4) ITEPA 2003 exempts any further benefit connected with a taxable car. HMRC's Employment Income Manual sets out the consequences:

• charging at work: no taxable benefit;
• a home chargepoint paid for by the employer: no taxable benefit;
• a charge card for public charging paid for by the employer: no taxable benefit;
• reimbursement of the electricity used to charge the company car at home or at a public charger: no separate tax charge under the benefits code, for business and private miles, under section 239(2). The employer must ensure the reimbursement is solely for the company car, not the household's other consumption.

This is a real difference from petrol and diesel cars, where employer-paid private fuel triggers the car fuel benefit charge (the appropriate percentage applied to a fixed multiplier) unless the driver repays all private fuel.

What the rule asks is evidence: an amount that corresponds to the car's charging, not a round sum. A flat monthly allowance with no link to the car's consumption is harder to defend as "solely for the company car".

Source: HMRC EIM23900, electric cars.

Real cost or Advisory Electricity Rate?

Two methods are used in practice:

• Advisory Electricity Rate (AER): since 1 September 2026, 7p per mile for home charging and 15p per mile for public charging, based on HMRC's assumption of 3.59 miles per kWh and 24.47p per kWh at home. Simple, but blind to each driver's tariff. A driver on an overnight EV tariff at around 7p per kWh spends about 2p per mile, and is paid 7p.
• Real cost: the kWh actually drawn by the car at home, valued at the driver's own tariff. More accurate, but it needs a reliable measurement of each charging session and a way to separate the car from the household.

Voltaback does the second: it reads charging sessions from the car (more than 48 brands connected) and values each kWh at the driver's real tariff, with a monthly export ready to import into your payroll software. Voltaback relies on the home's MID-certified meter, not on a standalone cable meter. The method is explained on our page on home charging reimbursement, and from the driver's side in our guide to charging a company car at home.

Source: GOV.UK, Advisory fuel rates.

Example: one driver, three ways to pay the electricity

A higher-rate taxpayer drives a £40,000 company EV for 12,000 miles a year, of which 10,000 miles are charged at home. At 3.59 miles per kWh, the car draws about 2,790 kWh at home.

With the AER, the first driver is slightly out of pocket and the second is paid about £505 more than the electricity cost. With real-cost reimbursement, both are paid exactly what the car used, and the employer's budget follows the fleet's real tariffs. Across a fleet, that difference can exceed the employer's entire Class 1A bill on the cars.

How employers organise the payment, monthly through payroll or through expenses, is covered in our guide to reimbursing EV charging expenses.

Source: Ofgem, Energy price cap.

The employer side: Class 1A NIC and reporting

Class 1A National Insurance

The employer pays Class 1A NIC at 15% on the cash equivalent of every company car. For a fleet of 50 electric cars at an average list price of £45,000 in 2026/27:

• cash equivalent per car: £45,000 x 4% = £1,800;
• Class 1A per car: £270;
• fleet total: £13,500 a year.

The same 50 cars as 120 g/km petrol cars at 30% would cost £101,250 a year in Class 1A. By 2029/30, the electric fleet's Class 1A rises to £30,375 at 9%: still far below, but a line to budget.

Reporting today: P11D or voluntary payrolling

Until April 2027, most employers report company cars after the end of the tax year on form P11D, pay Class 1A by 22 July (electronic payment), and HMRC collects the employee's tax through their tax code. Employers can already choose to payroll benefits voluntarily.

From April 2027: mandatory payrolling

From 6 April 2027, employers providing company cars, vans, car and van fuel and medical benefits must report them through payroll software and deduct the tax in real time, alongside other PAYE. Most other benefits follow from April 2028. Registration for voluntary payrolling re-opens on 5 November 2026 for employers who want to start early.

For company car fleets, that means the list price, CO2, availability dates and capital contributions must be correct in the payroll system every month, not just once a year. A car swapped in October now changes the October payslip.

Sources: GOV.UK, Mandatory reporting of benefits in kind in real time from April 2027, GOV.UK, Expenses and benefits deadlines.

Salary sacrifice electric cars

Under a salary sacrifice scheme, the employee gives up part of their gross salary in exchange for a car, usually with insurance, servicing and tyres included.

Normally, benefits provided through "optional remuneration arrangements" (OpRA) are taxed on the higher of the salary given up and the BIK. Cars with CO2 emissions of 75 g/km or less are carved out: the normal BIK rules apply. So an electric car through salary sacrifice is taxed at 4% of list price in 2026/27, and the employee saves income tax and employee NIC on the salary sacrificed. The employer saves Class 1 NIC on the sacrificed salary, then pays 15% Class 1A on the BIK.

Two points often misunderstood:

• Electricity is not part of the package. The salary sacrifice payment covers the car; the electricity for home charging is paid by the driver, unless the employer reimburses it, which it can do tax-free under section 239 like any company car.
• Exemptions do not stack. Most benefit exemptions do not apply through salary sacrifice. For example, workplace charging offered through a salary sacrifice arrangement becomes taxable.

The comparison between salary sacrifice, contract hire and car allowance is detailed in our guide to leasing electric company cars.

Source: GOV.UK, Salary sacrifice and the effects on PAYE.

Electric vans: no benefit charge at all

Vans follow a separate regime. A van available for private use is taxed on a flat standard value (£4,170 on HMRC's current employer guidance), whatever its price, plus a flat van fuel benefit if the employer pays private fuel. For a zero-emission van, the van benefit is 0% of that value: nothing to tax, nothing to report as a charge.

Section 239 ITEPA also covers vans: the van benefit charge is the only charge, so the employer reimbursing the electricity of an electric van charged at the driver's home creates no further tax. And if private use is limited to commuting and insignificant other use, the "restricted private use condition" removes the van benefit altogether, even for diesel vans.

For trades and field service fleets, the electric van is therefore the cleanest option for tax, provided its range fits the routes.

Sources: GOV.UK, Company vans: work out the value, HMRC EIM22710.

Directors and owner-managers

For a director of their own limited company, the same BIK rules apply: the company provides the car, the director pays income tax on the cash equivalent, and the company pays Class 1A NIC at 15%.

What makes the electric car attractive here is the combination with the company's tax position. The company can deduct the full purchase price of a new electric car in year one through the 100% first-year allowance (to 31 March 2027), while the director's BIK is 4% of the list price. A £50,000 electric car costs a higher-rate director £800 of income tax in 2026/27, and the company £300 of Class 1A.

Two cautions:

• Plan for the rising rate. At 9% in 2029/30, the same car costs the director £1,800 a year.
• Keep the electricity clean. If the company reimburses home charging, the amount must relate solely to the car; reimbursing the whole household bill would create taxable earnings.

Pool cars and the "insignificant private use" exception

A pool car creates no BIK at all, provided it meets every condition of section 167 ITEPA:

• it is available to, and actually used by, more than one employee;
• it is not ordinarily used by one employee to the exclusion of others;
• any private use is merely incidental to business use;
• it is not normally kept overnight at or near an employee's home.

HMRC reads "merely incidental" as a qualitative test. Taking a pool car home the evening before an early business trip can qualify; doing it often means the car is kept near the employee's home, and the pool status fails.

Separately, a company car made available for private use but with insignificant private use is still taxed in full: the BIK is based on availability, not actual use. The only ways to reduce it are a genuine prohibition on private use, enforced, or the reductions listed in the calculation above.

Source: HMRC EIM23455, pooled cars.

What the rise to 9% means for car policy choices

Electric remains the cheapest company car for tax up to 2029/30 by a wide margin. But the three options employers weigh are moving:

Practical consequences for a car policy written in 2026:

• Phase out plug-in hybrids on new orders running past April 2028, unless the driver accepts the jump.
• Cap list prices with the 9% rate in mind, not 4%: the BIK more than doubles over four years.
• Write the home charging rule into the policy: who pays, at what rate, with what evidence.
• Prepare payroll for April 2027.

The broader tax picture for electric company cars, including VED and capital allowances, is in our guide to the tax on electric company cars. How reimbursing charging works for HR and reward teams is on our HR page.

Source: GOV.UK, Expenses and benefits: business travel mileage.

Common mistakes and checkpoints

• Using the price paid instead of the list price. Discounts do not reduce the BIK; optional extras increase it.
• Using last year's percentage. It changes on 6 April every year.
• Treating a plug-in hybrid's range band as permanent. From 2028/29 all bands become 18%.
• Reimbursing home charging as a round monthly sum with no link to the car's consumption. Keep it solely for the company car, with evidence.
• Forgetting the employee's capital contribution (up to £5,000) or payments for private use, which reduce the cash equivalent.
• Ignoring availability dates when a car is replaced mid-year, a point that becomes a monthly payroll issue from April 2027.
• Calling a car a pool car while it sleeps outside an employee's home.
• Quoting English tax rates to Scottish drivers. A Scottish higher-rate taxpayer pays 42%, and the higher band starts at £43,663, so the monthly figure in a car policy should be checked against the driver's residence.
• Comparing a car allowance on gross figures. A cash allowance is taxed as salary and carries employer Class 1 NIC; an electric company car at 4% to 9% usually costs both sides less in tax, even after the mileage allowance the employee would claim on their own car.
• Leaving electricity out of the policy. Without a written rule, drivers pay it themselves, claim it inconsistently, or receive flat sums that do not meet the "solely for the company car" test.

Low BIK, and an electricity bill the employer can take off the driver's hands

At 4% in 2026/27 and 9% by 2029/30, the electric company car remains the most tax-efficient choice in the UK. The remaining question for many drivers is the electricity: who pays it, and how. The law allows the employer to pay it in full, tax-free, as long as the amount is solely for the company car.

Voltaback measures each charging session from the car and reimburses it at the driver's real tariff, without hardware, with ISO 27001 certification since 2 December 2025 and UK GDPR compliance. The employer never receives drivers' geolocation, and the accuracy of the measurement has been audited by an independent third party at a relative error of 1.22%. More than 200 companies already use it.

Talk to us about reimbursing your drivers' home charging