Electric company cars have been one of the most talked-about tax perks for limited company directors over the last few years. Low Benefit in Kind (BIK) rates made them incredibly tax efficient, and in some cases, almost a no-brainer.
But with BIK rates gradually increasing, a lot of directors are now asking the same question:
Is it still worth it in 2026?
How BIK on Electric Cars Works
If your limited company provides you with a car for personal use, it’s treated as a benefit.
The tax you personally pay is based on:
- The car’s list price (P11D value)
- The BIK percentage
- Your income tax rate
Electric cars have had very low BIK rates compared to petrol and diesel, which is why they’ve been so popular.
What Are the BIK Rates Now?
For fully electric cars:
- 2024/25: 2%
- 2025/26: 3%
- 2026/27: 4%
So yes the rates are increasing, but they are still low overall.
What Does That Mean in Real Terms?
Let’s take a simple example:
- Electric car list price: £50,000
- BIK rate (2026/27): 4%
- Taxable benefit: £2,000
If you’re a basic rate taxpayer:
- Personal tax = £400 per year
If you’re a higher rate taxpayer:
- Personal tax = £800 per year
That’s still relatively low compared to the cost of owning a car personally.
What About the Company?
From the company’s perspective, there are still clear advantages:
- Lease payments are generally deductible for Corporation Tax
- No fuel benefit charge if the car is fully electric
- Charging costs can often be covered tax efficiently
So it’s not just about the personal BIK, the company position matters too.
A Quick Note on VAT (Often Overlooked)
If your company leases a car that is also used personally (which is almost always the case), you can typically only reclaim 50% of the VAT on the lease payments.
The remaining 50% becomes an additional cost to the company.
This doesn’t usually make electric cars unattractive from a tax point of view, but it does affect the overall cost so it’s worth factoring into any comparison.
When It Still Makes Sense
An electric company car can still be a good option if:
- You were going to lease or buy a car anyway
- You want a newer, higher-value vehicle
- You prefer fixed monthly costs through the company
- You’re comfortable with the commitment of a lease
Even with rising BIK rates, the overall tax position is often still favourable.
When It Might Not Be the Best Option
It’s not always the right choice.
You might want to think twice if:
- You don’t really need a car
- You prefer flexibility (leasing ties you in)
- The company has inconsistent income
- You’re comparing it to a very low-cost personal vehicle
In some cases, taking dividends and running a cheaper personal car can still work out better.
The Bit People Often Miss
The decision isn’t just about the BIK percentage.
It’s about the overall cost versus benefit, including:
- The lease cost
- Corporation Tax relief
- Your personal tax
- VAT recovery on lease payments
- How you would otherwise fund a car
Two clients with identical cars can end up with completely different outcomes depending on their wider situation.
So… Is It Still Worth It?
In most cases, yes it still can be.
BIK rates are increasing, but they are still low enough that electric company cars remain one of the more tax-efficient benefits available to directors.
That said, it’s no longer the automatic choice it once was.
It’s now more about:
- Running the numbers properly
- Looking at your full situation
- Making a decision based on how you actually use your company
Final Thought
Electric cars are still a good option, just not a blanket recommendation for everyone anymore.
A quick review before committing to a lease can make a big difference, especially as costs and tax rules continue to evolve.
If you’re thinking about getting a company car and want to sense check whether it stacks up, it’s always worth running through the numbers first.
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