🚗 UK Company Car Tax Set to Rise in 2026 - Why EVs Still Outshine Petrol and Diesel
As we approach the new 2026/27 tax year, company car drivers in the UK are facing rising Benefit-in-Kind (BiK) rates - the tax charged when employers provide vehicles for personal use. While all drivers will see increases, those behind the wheel of fully electric vehicles (EVs) will still be in a comparatively strong position.
📈 BiK Rates on the Up
According to the latest HMRC-linked guidance, BiK rates for company cars are increasing year-on-year as part of the government’s move toward fairness and a greener fleet. For fully electric cars, the rate will rise to 4% in the 2026/27 tax year - up from 3% this year.
Here’s a brief percentage-based comparison of expected Benefit-in-Kind (BiK) rates over the next three tax years in the UK for fully electric vehicles (EVs) versus typical petrol/diesel cars:
📊 Company Car BiK Rates (EV vs Petrol/Diesel)
| Tax Year | EV (0 g/km) | Petrol/Diesel (approx range) |
|---|---|---|
| 2025/26 | 3% | ~31 %–38 % (typical range based on CO₂) |
| 2026/27 | 4% | ~32 %–39 % |
| 2027/28 | 5% | ~33 %–40 % |
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âš¡ EVs: Still a Smart Choice for Company Car Drivers
Even with rising BiK rates, EVs remain one of the most tax-efficient options for drivers choosing a company car. The key reasons include:
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Lower taxable benefit: Zero-emission vehicles attract significantly lower BiK rates versus combustion engines, meaning a lower tax bill for the driver.
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Reduced running costs: Electricity tends to cost much less per mile than petrol or diesel, translating into cheaper day-to-day use.
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Additional perks: In some cities, EVs continue to enjoy benefits like access to bus lanes, free parking, and congestion charge exemptions - further improving the appeal for company car users.
Volkswagen ID. Range
The Volkswagen ID.3 and ID.4 are among the brand’s standout pure electric models. These EVs benefit from low BiK rates and are commonly chosen as company fleet vehicles thanks to their balance of range, practicality, and running cost savings. Volkswagen also promotes salary sacrifice schemes that allow employees to secure these vehicles with attractive tax advantages.
Å koda Enyaq and Elroq
Škoda offers the Enyaq and the more recent Elroq as fully electric options that blend space and efficiency — ideal for business drivers needing practical everyday usability. As with other EVs, these models benefit from reduced BiK rates compared with conventional engines, helping to keep taxable costs low.
Cupra Born
For those seeking a sportier electric hatchback, the Cupra Born is earning attention. Not only does it deliver engaging performance in a zero-emissions package, but incentives such as retail price guarantees have helped keep acquisition costs competitive, making it an appealing choice for company car users who want both style and savings.
📊 What This Means for Drivers
For many company car drivers, choosing an EV from manufacturers like Volkswagen, Škoda or Cupra means striking a balance between tax efficiency and future-proof motoring. While rises in BiK rates reflect evolving policy priorities, fully electric cars remain one of the clearest ways to minimise company car tax liabilities — especially compared with petrol or diesel alternatives.
With a continued emphasis on electrification and greener fleets, employers and drivers alike are encouraged to assess their company car options well before the April 2026 changes take effect.
Get in touch to discuss your options
If you would like to learn more about the company cars, discuss fleet pricing, or arrange a demonstration, please get in touch.
Contact Liam Adamson today to explore how moving to EV could save your tax and benefit you and your business in the long run
