With nearly one in four cars sold in the UK being electric in 2025, the EV market is growing at a staggering pace. The personal tax associated with buying a vehicle through a limited company is also on the way up.
To start, it is worth being clear about what the rate is. The Benefit in Kind rate on a fully electric company car is 4% for the current tax year. It rises to 5% next year, 7% the year after, and reaches 9% in 2029/30. That is the last year for which a rate has been set. It is not a ceiling, and nothing has been announced for 2030/31 onwards. The path was announced in the October 2024 Budget and left untouched in November 2025.
So the real question is not what the rate is today, but what the whole arrangement costs over the years you will actually have the car, and whether that still beats the alternatives.
What the path actually costs
Take a £45,000 electric car and a director paying tax at the higher rate. The Benefit in Kind rate is applied to the list price plus any extras added to the car and the resulting figure is taxed as though it were income.
The formula to work out the Benefit In Kind is:
| Tax year | Rate | Taxable Benefit | Tax at 40% |
| 2026/27 | 4% | £1,800 | £720 |
| 2027/28 | 5% | £2,250 | £900 |
| 2028/29 | 7% | £3,150 | £1,260 |
| 2029/30 | 9% | £4,050 | £1,620 |
The comparison that matters is a petrol equivalent. A £45,000 petrol car emitting 130g/km sits at 32% this year. That is a taxable benefit of £14,400 and personal tax of £5,760, in one year (assuming a 40% taxpayer). The electric car costs less over four years than the petrol car costs in a single one. The gap narrows over the period, as the electric rate climbs faster than the petrol rate, but it never comes close to closing.
If you want to check the figures for a specific car, HMRC’s company car tax calculator will do it for you.
The cost the company carries
Benefit in Kind is not the only tax to consider, the company also pays employer’s National Insurance at 15% on the same taxable figure.
On the £45,000 car above, that is £270 in the first year, rising to £608 by 2029/30. It is deductible for corporation tax, so the real cost is lower, but it belongs in the calculation and is routinely left out of the comparisons you will find online.
Pay per mile arrives in April 2028
This is the new part, and it is the reason this decision looks different from how it looked twelve months ago.
From 1 April 2028, electric cars will pay 3p for every mile driven, on top of the vehicle excise duty they already pay. Plug-in hybrids will pay 1.5p. The design was confirmed in July 2026 following a consultation, so this is settled rather than speculative. Electric vans are exempt.
For a director covering 10,000 miles a year, that is £300 annually from 2028, or £25 a month. Add standard vehicle excise duty, which electric cars have paid since April 2025 and which currently stands at £200 a year, and the total annual road tax comes to roughly £500.
It is not trivial and needs to be considered.
One change in your favour
The expensive car supplement, which adds a substantial annual charge to any vehicle above a list price threshold, applied to cars over £40,000 when we last wrote about this. For zero emission cars, the threshold has risen to £50,000 for 2026/27.
That takes a large slice of the sensible middle of the electric market out of the supplement entirely. If you were previously choosing a cheaper car specifically to duck under £40,000, that constraint has loosened.
So, is it still worth it?
For most directors in most circumstances, yes, and by a wide margin. The rate is rising but the gap against petrol and diesel remains significant. The path is legislated through to 2030, and predictability is worth a great deal when you are committing to something for a number of years.
What has changed is that the decision now deserves an actual calculation rather than an assumption. Three years ago the answer was so obviously favourable that working it through felt unnecessary. With a rising rate, a new per mile charge, and employers’ National Insurance in the mix, the margin is narrower and depends more on your circumstances than it used to.
One word of caution. There is a Budget on 28 October 2026, and motoring taxation has been revisited in each of the last three. The Benefit in Kind path is legislated to 2030 and has survived two Budgets already, which is about as much certainty as this area offers, but if you are on the edge of a decision, it is worth knowing when the next announcement lands. All our clients receive a detailed brief on the tax changes and what they mean for them.