In recent years, the UK Government has introduced various incentives to promote the adoption of ultra-low emission vehicles (ULEVs). Despite recent changes, tax benefits and incentives remain available to support UK businesses moving to electric cars and vans. Car tax changes in 2026 will affect EV drivers, company cars and fleets. 

Following the Spring Statement, there are no changes to upcoming vehicle tax, electric vehicle incentives, or EV-related taxation.

Contents

Cars | EV Company Car Tax (BiK) | Vehicle Excise Duty (VED) | Expensive Car Supplement |Electric Vehicle Duty (eVED), 3p-per-mile |Lease Rental Restriction | 100% First-Year Allowance (Cars) | VAT | Vans | Plug-in Vehicle Grant | 100% First-Year Allowance (Vans) | Van Benefit Charge | Van VED | Double Cab Pick-Ups | Fuel Benefit Charge | Advisory Fuel Rates | Mileage Rates | Salary Sacrifice | Employer National Insurance | National Living Wage | Charging Grants | Useful links

Cars

How will Benefit-in-Kind (BiK) rates change for EVs?

Benefit-in-Kind (BiK), often referred to as company car tax, applies when an employee uses a company car for personal journeys. For company cars registered on or after 6 April 2020, a low company car tax rate continues to apply to zero-emission cars.

For the 2025/26 tax year, zero-emission company cars incur a 3% BiK rate. For 2026/27 this increases by 1% to 4%. The rate then rises by 1% per year until 2028, and by 2% annually until 2030.

Zero-emission BiK rates (0g/km CO₂)

Example: Volkswagen ID.4 BiK (2025/26 vs 2026/27)

Vehicle: Volkswagen ID.4 210kW Match Pro 77kWh 5dr Auto (Electric)
P11D value: £44,305
CO₂ emissions: 0g/km

Benefit-in-Kind rates for cars emitting CO₂

For cars emitting 1–50g CO₂ per kilometre, including hybrids, rates rise to 18% in 2028/29 and 19% in 2029/30. For all other bands, BiK rates rise by 1 percentage point annually in 2028/29 and 2029/30, with the maximum Appropriate Percentage increasing to 38% in 2028/29 and 39% in 2029/30.

For a full breakdown use our BiK rate table. For more examples and comparisons: Company car tax examples.

How much Vehicle Excise Duty (VED): will an electric car pay?

Vehicle Excise Duty (VED), also known as road tax, is based on a vehicle’s CO₂ emissions. Electric vehicles produce no tailpipe emissions, so they currently pay the lowest first-year rate of £10 until 2029/30. From the second year of registration onwards, zero-emission cars pay the standard annual rate, currently £195 per year.

How do first-year VED rates compare?

The first-year VED rate is based on the vehicle’s CO₂ emissions when first registered. Zero-emission vehicles pay £10, while petrol and diesel vehicles pay higher rates depending on their emissions.

Diesel vehicles that do not meet the Real Driving Emissions 2 (RDE2) standard may pay a higher charge. You can ask the manufacturer whether your vehicle meets RDE2.

How do second-year VED rates compare?

From the second year onwards, cars typically move to the standard annual rate (currently £195 per year for cars). This means the biggest VED difference is often seen in the first-year rate when comparing electric vs petrol/diesel.

What is the Expensive Car Supplement and do EVs pay it?

Under the Expensive Car Supplement, any car that costs more than £40,000 when new incurs an additional annual fee of £425 for five years, starting from the first VED payment.

The £40,000 threshold is based on the manufacturer’s official list price including optional extras, not the price actually paid. This is important because discounted deals can still be caught by the supplement if the list price exceeds the threshold.

This can also affect used cars. If a car originally had a list price above the threshold, the supplement continues until the vehicle reaches its sixth year of registration.

EVs can also be liable for this supplement. However, the Government announced additional support by increasing the threshold for electric cars from £40,000 to £50,000.

What is Electric Vehicle Duty (eVED) it and when will EVs pay it? 

Electric Vehicle Excise Duty, often refered to as eVED, was announced in the Autumn Budget, as the Governments solution to the reduction in Fuel Duty. eVED, as proposed, will see Electric Car drivers, pay 3p-a-mile in tax from April 2028, meaning the average Lease Electric Driver, covering 10,000 miles a year, will pay £300. 

Find out how the proposed 3p-per-mile eVED compares to Fuel Duty. 

Lease Electric have met with Sir Geoffrey Clifton-Brown MP, and Chair of the Public Accounts Commitee, to present an alternative approach designed to support revenue generation while avoiding unnecessary administrative burden and reducing the risk of loopholes or misuse. Proposing a model that would utilise the existing Vehicle Excise Duty (VED) framework, supported by data already published by vehicle manufacturers, enabling the Government to raise revenues more efficiently without increasing administrative costs for taxpayers. Read Lease Electric's Alternative to Proposed EV Per-Mile Tax.

Lease Rental Restriction (Corporation Tax Relief)

For leased company cars, the finance element of lease rentals can be offset against company profits, reducing corporation tax liability. Electric cars continue to offer greater corporation tax relief, with the 100% lease rental offset threshold reduced to 50g/km CO₂ from April 2021. Cars emitting over 50g/km can only offset 85% of the lease rental.

Example: Polestar 4 Long Range Single Motor Prime, effective monthly rental £589.47.

If lease rentals are not spread evenly (for example, due to a large upfront payment), tax relief is typically spread evenly across the lease term rather than only during the period the cost is incurred.

100% First-Year Writedown Allowance (Corporation Tax Relief)

When a company purchases a fixed asset, it is not usually possible to deduct the entire cost immediately because it is classed as capital expenditure. Instead, tax relief is typically claimed through capital allowances over time.

Company cars have special capital allowance rules based on CO₂ emissions. Because electric cars emit 0g/km, the full capital expenditure can typically be claimed in the first year. This can apply even when the car is purchased via contract purchase, lease purchase or hire purchase.

This 100% allowance is extended until 31 March 2026 for corporation tax and 5 April 2026 for income tax.

Example: Polestar 4 Long Range Single Motor Prime. based on disposing of the vehicle after 3 years and 45,000 miles

*Assumes current corporation tax rate of 25% remains unchanged. 

What VAT can I reclaim for an electric vehicle?

There is no special VAT treatment for electric cars and vans compared with petrol or diesel vehicles. They follow the same VAT rules.

Typically, no VAT is reclaimable when purchasing cars (including via contract purchase, lease purchase or hire purchase). However, qualifying commercial vehicles can often reclaim 100% of VAT where they are used solely for business purposes.

For leased company cars, HMRC typically treats use as 50% personal and 50% business, meaning half of the VAT on the rental can usually be reclaimed. If a fixed-price maintenance package is included, 100% of the VAT on that package can usually be reclaimed.

Where electric cars and hybrids emitting less than 50g/km can offset 100% of lease rentals against corporation tax under the Lease Rental Restriction rules, there can be an additional benefit because the offset applies to the rental amount including any non-reclaimable VAT element.

Vans

 How much can I save with the Plug in Vehicle Grant?

The Government’s Plug-in Vehicle Grant has been extended until 2027. It currently provides a discount of 35% of the purchase price of a van, up to a maximum of £2,500 for small vans and £5,000 for large vans, however 2026-2027 grant levels are yet to be confirmed. 

Eligible vans are those with CO₂ emissions of less than 50g/km and the ability to travel at least 96km (60 miles) without any emissions. Small vans are defined as having a Gross Vehicle Weight (GVW) of less than 2,500kg, while large vans are those between 2,500kg and 3,500kg.

100% First-Year Writedown Allowance (Vans)

Until April 2025, a business purchasing a van with zero CO₂ emissions may be eligible for a 100% First-Year Allowance (FYA), provided the business does not claim the Government’s Plug-In Van Grant.

Other vans are generally treated as plant and machinery and allocated to the main pool, where they are eligible for writing down allowances at 18%, unless an Annual Investment Allowance is claimed.

What is the Van Benefit Charge for 2026?

Unlike company cars (which are taxed based on value and CO₂ emissions), vans used for business and personal purposes are taxed using the Van Benefit Charge. Since 6 April 2021 there has been a zero van benefit charge for electric vans.

From April 2026, the van benefit charge for vans capable of producing emissions increases from £4,020 (2025/26) to £4,170. This increase does not apply to fully electric vans.

How much Vehicle Excise Duty (VED) will Electric Vans pay in 2026?

Vehicle Excise Duty for vans is determined differently to cars. Electric vans are charged the standard annual rate for light goods vehicles, currently set at £345.

What Tax are Double Cab Pick-Ups liable for?

Double Cab Pick-Ups are classified as cars for tax purposes, meaning they may be subject to Vehicle Excise Duty and the Expensive Car Supplement. If the vehicle is used for personal journeys, employees may incur company car tax (BiK) based on the vehicle’s details and usage.

How much is the Fuel Benefit Charge for vans?

While businesses can reimburse employees for fuel in different ways, the van fuel benefit charges are set to increase from April 2026, in line with the Consumer Price Index.

HMRC does not classify electricity as a fuel, meaning charging electric cars and vans does not incur any fuel benefit BiK.

What are the current Advisory Fuel Rates?

Advisory Fuel Rates apply to employees using a company car. From The advisory fuel rate for EVs is 7 pence per mile or homecharging, and 14 pence per mile for public charging. Rates for petrol and diesel vehicles vary by engine size and are updated periodically.

Rates are reviewed by HMRC, including scheduled review points such as 1 March 2026.

What are the current Mileage rates for cars and vans?

Where employees use their own vehicle for business travel, approved mileage rates can apply. For the first 10,000 business miles in a tax year, the rate is 45p per mile. Each business mile over 10,000 is 25p per mile, this figure is also reccomended for EV drivers.

Salary Sacrifice

Although rising BiK rates from 2028 to 2030 reduce the employee savings available over time, EV salary sacrifice can remain highly attractive. This is because it combines a low BiK rate with income tax and National Insurance savings, and it can also reduce employer costs.

Employer National Insurance

The rate of Employer National Insurance contributions remain at 15%. With the per-employee threshold is reduced remaining at £5,000 per year. These changes take effect from 6 April 2026.

If your company participates in our EV Salary Sacrifice Scheme and decides to share National Insurance savings with employees, salary sacrifice savings may increase.

National Living Wage (NLW)

To be eligible to take part in a salary sacrifice scheme, the overall salary sacrificed cannot take an individual below National Minimum Wage. In 2026, National Minimum Wage increase to £12.71 per hour from April 2026, resulting in approximately £1000 in additional annual earnings for a full-time worker earning Minimum Wage / National Living Wage.

- What Salary do you need to Join an EV Salary Sacrifice Scheme?

Charging Grants

Government charging schemes and grants have supported both individuals and businesses to transition to EVs. The following grants have been extended and are due to close on 31 March 2026 at 11:59pm:

Workplace Charging Scheme;
Workplace Charging Scheme for state-funded education institutions;
Electric vehicle infrastructure grant for staff and fleets;
Electric vehicle chargepoint grant for renters and flat owners;
Electric Vehicle Chargepoint Grant for Households with On-Street Parking;
Electric vehicle chargepoint and infrastructure grants for landlords.

Find more about these charging grants here: Charging grants.

The rates and allowances mentioned are based on Government announcements and are for information purposes only. Lease Electric recommends consulting your Financial Advisor or Accountant and seeking professional advice before making any decisions.

Useful links

Autumn Budget
Charging Grants
Tax Relief for EVs
Electric Company Cars
Electric Company Vans
About EV Salary Sacrifice
EV Salary Sacrifice FAQs
New driving licence rules for electric vans
HMRC Guidance – Vehicle tax for electric, zero or low emission vehicles
HMRC Guidance – Increase to van benefit charge and fuel benefit charges
What Salary do you need to Join an EV Salary Sacrifice Scheme?
What are Company Cars?