UK EV vs Petrol Company Car Calculator
Compare the total annual running costs of an electric vehicle versus a petrol company car in the UK. See how Benefit in Kind (BIK) tax rates and fuel costs combine to determine which option saves you the most money each year.
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.
Company Car Cost Formulas
EV BIK Tax: Car List Price × EV BIK Rate% × Income Tax Rate%
Petrol BIK Tax: Car List Price × Petrol BIK Rate% × Income Tax Rate%
EV Fuel Cost: Annual Miles × EV Cost Per Mile
Petrol Fuel Cost: Annual Miles × Petrol Cost Per Mile
EV Total Annual Cost: EV BIK Tax + EV Fuel Cost
Petrol Total Annual Cost: Petrol BIK Tax + Petrol Fuel Cost
Annual Savings with EV: Petrol Total − EV Total
Where:
- BIK Rate = Percentage based on CO2 emissions (3% for pure EVs in 2025-26, 25-37% for petrol)
- Tax Rate = Employee's marginal income tax rate (20%, 40%, or 45%)
- Cost Per Mile = Fuel or electricity cost per mile driven
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
Higher-Rate Taxpayer, £40,000 Car, 10,000 Miles/Year
A higher-rate (40%) taxpayer compares a £40,000 EV (3% BIK) with a £40,000 petrol car (28% BIK), driving 10,000 miles per year.
- EV BIK Tax = £40,000 × 3% × 40% = £480
- Petrol BIK Tax = £40,000 × 28% × 40% = £4,480
- EV Fuel = 10,000 × £0.05 = £500
- Petrol Fuel = 10,000 × £0.15 = £1,500
- EV Total = £480 + £500 = £980
- Petrol Total = £4,480 + £1,500 = £5,980
- Annual Savings with EV = £5,980 − £980 = £5,000
- Monthly Savings = £5,000 ÷ 12 = £416.67
Frequently Asked Questions
What is Benefit in Kind (BIK) tax on a company car?
Benefit in Kind tax is the income tax you pay on the value of benefits provided by your employer, including company cars. For company cars, the taxable benefit is calculated by multiplying the car list price by the appropriate BIK percentage rate (determined by CO2 emissions) and then applying your marginal income tax rate. For example, a 40,000 pound car with a 28 percent BIK rate creates a taxable benefit of 11,200 pounds. A basic-rate taxpayer would pay 2,240 pounds in BIK tax (20 percent of 11,200), while a higher-rate taxpayer would pay 4,480 pounds (40 percent of 11,200). The BIK tax is usually collected through your PAYE tax code, reducing your take-home pay each month.
Why is the EV BIK rate so much lower than petrol?
The UK government sets very low BIK rates for electric vehicles as a deliberate policy to incentivise the adoption of zero-emission transport. The 3 percent rate for pure EVs in 2025-26 compared to 25 to 37 percent for petrol cars reflects the government commitment to reaching net zero carbon emissions. This policy was introduced to encourage company car fleets, which represent a large proportion of new car registrations, to switch to electric vehicles. The rate was 2 percent until April 2025 and rises by 1 percent per year, reaching 4 percent in 2026-27 and 5 percent by 2027-28, giving drivers long-term certainty about their tax position.
How do I calculate my cost per mile for an EV?
To calculate your EV cost per mile, divide the cost of electricity by the vehicle efficiency. If you charge at home on a standard tariff of around 30 pence per kWh and your EV consumes approximately 3.5 miles per kWh, your cost per mile is about 8.5 pence. With an off-peak or EV-specific tariff at around 10 pence per kWh, the cost drops to approximately 3 pence per mile. Public rapid chargers typically cost 60 to 80 pence per kWh, making the cost per mile 17 to 23 pence. Most drivers use a mix of home and public charging, so a blended rate of 4 to 7 pence per mile is reasonable for predominantly home-charged vehicles.
Does the car list price include options and accessories?
Yes, the car list price used for BIK calculation is the official published price of the vehicle including all factory-fitted options, delivery charges, and VAT. This is the price on the day the car was first registered, not the price you or your employer actually paid. Dealer discounts and fleet discounts do not reduce the BIK calculation. However, capital contributions made by the employee (up to a maximum of 5,000 pounds) can reduce the list price used for the BIK calculation. It is important to use the correct list price as HMRC will apply the official figure regardless of any discount obtained.
Can I claim mileage for a company car?
If you have a company car and pay for fuel yourself, you can claim Mileage Allowance Relief at the advisory fuel rates published by HMRC for business miles driven in the company car. For electric vehicles, HMRC sets an advisory electricity rate (currently 9 pence per mile) that employers can reimburse tax-free for business mileage. If your employer provides a fuel card that covers all fuel including personal use, you will face an additional fuel benefit charge on top of the car BIK. The fuel benefit charge is calculated by multiplying a fixed amount (currently 27,800 pounds) by the car BIK percentage and your tax rate. Many drivers find it more tax-efficient to pay for fuel themselves and claim the advisory rates for business miles.