UK EV vs Petrol Company Car Calculator

How Company Car Costs Are Calculated in the UK

When an employer provides a company car for personal use, the employee must pay Benefit in Kind (BIK) tax on the value of that benefit. The amount of BIK tax depends on three key factors: the list price of the car (its official price when new, including options and accessories), the BIK percentage rate (which is determined by the car's CO2 emissions), and the employee's income tax band. For electric vehicles, the BIK rate is dramatically lower than for petrol or diesel cars, making EVs one of the most tax-efficient company car choices available in the UK today. This calculator helps employees and fleet managers compare the total annual cost of running an EV versus a petrol company car, including both the BIK tax liability and fuel or charging costs.

The BIK system works by treating a percentage of the car's list price as a taxable benefit added to the employee's income. For pure electric vehicles, the BIK rate is just 3 percent for the 2025-26 tax year, rising to 4 percent in 2026-27 and 5 percent by 2027-28. In contrast, petrol cars typically attract BIK rates of 25 to 37 percent depending on their CO2 emissions, with most mainstream models falling in the 28 to 33 percent range. This enormous difference means that an electric car with the same list price as a petrol car generates a fraction of the tax liability. For a higher-rate taxpayer with a 40,000 pound car, the annual BIK tax on an EV is just 480 pounds, compared to 4,480 pounds for a typical petrol car at 28 percent. This 4,000 pound difference in tax alone makes EVs extremely attractive as company cars.

Why Electric Company Cars Are So Tax-Efficient

The UK government has deliberately set very low BIK rates for electric vehicles as part of its strategy to accelerate the transition to zero-emission transport. The 3 percent BIK rate for pure EVs in 2025-26, rising only gradually to 5 percent by 2027-28, makes electric company cars by far the most tax-efficient vehicle benefit available. This policy recognises that company cars represent a significant proportion of new car registrations in the UK and that encouraging fleet operators and company car drivers to choose EVs will have a substantial impact on carbon emissions. The tax savings are so significant that many employees who previously opted out of company car schemes in favour of car allowances are now returning to company car schemes specifically to access an electric vehicle at the low BIK rate.

Fuel Cost Comparison: EV vs Petrol

Beyond the enormous BIK tax advantage, electric vehicles also offer significantly lower running costs per mile. The average cost of electricity for home charging in the UK is approximately 4 to 7 pence per mile, depending on the vehicle's efficiency and the electricity tariff. Public rapid charging is more expensive, typically 8 to 15 pence per mile, but still considerably cheaper than petrol. A typical petrol car costs 12 to 18 pence per mile in fuel, depending on fuel prices and the vehicle's fuel economy. For an employee driving 10,000 miles per year, this translates to a fuel cost difference of approximately 700 to 1,000 pounds per year in favour of the EV. When combined with the BIK tax savings, the total annual saving of choosing an EV over a petrol company car can easily exceed 2,500 to 5,000 pounds for a higher-rate taxpayer, making it one of the most compelling financial decisions available to UK employees.

Additional Considerations

While BIK tax and fuel costs are the primary factors in this comparison, there are other considerations worth noting. Electric vehicles typically have lower maintenance costs due to fewer moving parts, regenerative braking that reduces brake wear, and no need for oil changes. Insurance costs for EVs have been higher historically, though the gap is narrowing as the technology matures and more data becomes available. Charging infrastructure is an important practical consideration, particularly for those without off-street parking or dedicated home charging. Employers can also provide workplace charging as a tax-free benefit, further enhancing the financial case for an EV company car. Company car drivers should also consider the vehicle's range, their typical driving patterns, and the availability of public charging along their regular routes when making their decision.

Example Calculation