Electric car road tax 2026 — what EV owners are now paying and the BiK rate rise explained

For over a decade, electric vehicles were completely exempt from Vehicle Excise Duty (VED), commonly known as road tax. That exemption ended on 1 April 2025, and in 2026/27 the full VED regime is now firmly in place for EVs. Combined with a BiK rate increase for company car drivers, the tax costs of EV ownership have risen significantly — though they still compare very favourably to petrol and diesel.

What is the VED (road tax) rate for electric cars in 2026?

The VED rate depends on when your EV was first registered:

• New EVs registered from 1 April 2025: First year rate of £10, then standard rate of £195/year from year two onwards
• EVs registered between 1 April 2017 and 31 March 2025: Standard rate of £195/year (no first year rate applies)
• EVs registered before 1 April 2017: Zero VED — these older vehicles are still exempt

Additionally, the Expensive Car Supplement applies to EVs with a list price above £40,000. For these vehicles, an extra £620/year is charged for years 2–6 of registration, on top of the standard £195. This makes the annual VED cost for a premium EV up to £815/year.

Company car BiK rate for electric cars in 2026/27

If you have a company electric car, you also pay Benefit-in-Kind (BiK) tax on the perk of having private use of the vehicle. The BiK rate for electric cars in 2026/27 is 4%, up from 3% in 2025/26. This rate is set to rise by approximately 1–2 percentage points each year until it reaches around 9% in 2029.

To calculate your annual BiK tax cost:

• Take the car's P11D value (the list price including options, excluding VED and first-year registration)
• Multiply by the BiK percentage (4%)
• Multiply by your income tax rate (20% or 40%)

Example: A Tesla Model 3 with a P11D value of £42,000. BiK = 4% × £42,000 = £1,680. Tax for a 40% taxpayer = 40% × £1,680 = £672/year in BiK tax. This compares to a petrol car with a 30% BiK rate: 30% × £42,000 = £12,600. 40% tax = £5,040/year — nearly 8 times more expensive.

Use our company car tax calculator for your specific car and tax rate.

Is an EV company car still worth it in 2026?

Yes — despite the rising BiK rate, an electric company car remains vastly more tax-efficient than a petrol or diesel equivalent. The comparison is stark:

• Electric car: 4% BiK rate in 2026/27
• Petrol/diesel car (typical): 20–37% BiK rate depending on CO2 emissions

Even in 2029 when the EV BiK rate reaches around 9%, it will still be less than half the rate for most conventional cars. For many employees, having a company EV remains one of the most tax-efficient employee benefits available.

EV salary sacrifice — still the most tax-efficient option

If you lease an EV through a salary sacrifice scheme, the BiK tax applies at just 4% — and your gross salary is also reduced, saving income tax, employee NI, and potentially employer NI too. The employer NI saving (15% in 2026/27) is often passed back to the employee, making the effective monthly cost even lower.

For a 40% taxpayer leasing an EV worth £400/month through salary sacrifice, the real net cost after all tax savings is often closer to £200–£220/month. Use our salary sacrifice calculator to model the exact figures for your income and chosen car.

What about the proposed electric VED mileage charge?

The government has consulted on introducing an Electric Vehicle Excise Duty (eVED) — a mileage-based charge for EVs to replace fuel duty revenue. This is planned to start in April 2028 and will be set at half the equivalent rate of fuel duty for electric cars. This is a future change and does not affect VED costs in 2026.

Does VED affect your payslip?

VED is typically paid directly by the car's registered keeper (either you or your employer for a company car). It does not appear on your payslip. However, if you have a company car, the BiK tax does affect your payslip — it is collected via your PAYE tax code, which adjusts your personal allowance downward to recover the tax owed on the benefit. Check your tax code includes the correct car benefit figure. Use our tax code checker to verify.

Frequently Asked Questions

I bought my EV before 2025 — do I pay road tax?

If your EV was registered between 1 April 2017 and 31 March 2025, you now pay the standard annual rate of £195/year. Your first bill would have arrived in April 2025. EVs registered before April 2017 remain exempt from VED.

Does the Expensive Car Supplement apply to my EV?

Yes, if your EV had a list price (P11D value) above £40,000 when new. The supplement is £620/year and applies from the second year of registration for years 2–6. After year 6, you only pay the standard £195. EVs are no longer exempt from the supplement — they were from 2017–2025, but this ended when the general EV exemption ended.

My employer provides free home charging — is that a taxable benefit?

HMRC has confirmed that employer-provided charging of electric vehicles at work (or at home via an employer-supplied charger) is exempt from income tax and NI. This is a valuable perk — effectively free electricity for your car, with no tax implications. Home charging equipment (a wallbox) provided by the employer is also exempt under the EV charging exemption.

I have a plug-in hybrid — what is my BiK rate?

Plug-in hybrids (PHEVs) have BiK rates based on their electric-only range. A PHEV with a range above 130 miles has a 5% BiK rate in 2026/27, rising to around 14–19% for PHEVs with shorter ranges. These rates are significantly lower than pure petrol/diesel equivalents but higher than fully electric vehicles. Use our company car tax calculator to find your specific PHEV rate.

Is a car allowance better than a company EV for tax purposes?

A car allowance is added to your salary and taxed as earnings at your marginal rate. For a 40% taxpayer receiving a £400/month car allowance, only £240/month is received after tax. A company EV leased through salary sacrifice at £400/month might cost you less than £220/month after all savings — making it significantly more tax-efficient than the cash equivalent. The comparison depends heavily on the specific car value and your tax rate.