Electric Company Cars vs Mileage Claims: What Actually Saves a UK Director Money in 2026
Benefit-in-kind on EVs, the 45p mileage allowance, salary sacrifice and the real numbers behind putting a car through your limited company in the UK.
"Should I put the car through the company?" is probably the most asked question in UK owner-managed business, and the honest answer has changed. For petrol and diesel it is still usually no. For electric vehicles it is often yes — but by a narrower margin each year as benefit-in-kind rates climb.
How company car tax actually works
A company car available for private use creates a benefit in kind. The taxable value is the car's list price multiplied by an appropriate percentage set by CO2 emissions. You pay income tax on that value at your marginal rate; the company pays Class 1A National Insurance on it.
For a petrol car with meaningful emissions the appropriate percentage sits in the high twenties or low thirties. On a £40,000 car, that is a benefit of roughly £12,000 a year, costing a higher-rate taxpayer around £4,800 in personal tax before the company's NIC. That is why the traditional answer was no.
Electric vehicles are taxed on a very low appropriate percentage by comparison, which is the entire basis of the case for them. The rate is scheduled to rise gradually, so a decision that works today should be modelled across the whole period you expect to hold the car, not just year one.
The company side of an EV
Three things stack in the company's favour:
- Capital allowances. A new, zero-emission car qualifies for a 100 percent first-year allowance, so the full cost reduces taxable profit in the year of purchase. Used EVs do not qualify for this and instead go into the main pool at 18 percent.
- Running costs. Insurance, servicing, tyres and business electricity are company expenses. VAT recovery on the purchase is generally blocked for cars with any private use, but VAT on maintenance is usually recoverable.
- Workplace charging. Providing charging at the business premises for an employee's own car is not a taxable benefit, and a home charge point provided for a company car is exempt.
The alternative: keep the car personal and claim mileage
If you own the car yourself, the company can pay you Approved Mileage Allowance Payments tax free: 45p per business mile for the first 10,000 miles in a tax year, then 25p thereafter. Motorcycles are 24p, bicycles 20p.
At 10,000 business miles that is £4,500 a year out of the company, free of tax and NIC in your hands, and deductible for the company. No benefit in kind, no P11D, no Class 1A. For a low-value car with high business mileage, this is almost always the winner.
Note the two common errors: home to a permanent workplace is commuting, not business mileage, and the 10,000-mile boundary is per tax year per employment, not per car.
Salary sacrifice: the third option
Salary sacrifice for an ultra-low-emission car remains one of the few arrangements not caught by the optional remuneration rules. The employee gives up gross salary — saving income tax and employee NIC — in exchange for an EV taxed at the low benefit-in-kind rate. The employer saves Class 1 NIC on the sacrificed salary and pays Class 1A on the smaller benefit instead.
For a director on a salary large enough to sacrifice from, this can be the most efficient route of all. It does not work if sacrificing takes pay below the National Minimum Wage, and it affects pension contributions and statutory pay calculated on reduced earnings.
A simple decision framework
- High business mileage, modest car value — keep it personal and claim 45p per mile.
- Low business mileage, want a new EV — company purchase or salary sacrifice usually wins.
- Any petrol or diesel car with real private use — keep it out of the company.
- Van used only for business plus insignificant private use — often the cheapest option of all; the van benefit charge is a flat amount, and there is no van fuel benefit where private fuel is not provided.
The number that decides it
Model three figures over the full ownership period: the personal tax on the benefit in kind, the corporation tax saved by the company, and what the same money would cost you taken as dividends and spent personally. Do it for each year, because benefit-in-kind percentages rise. A car that saves you money in year one and costs you money in year four is not a saving, it is a deferral.
Illustrative guidance only. Run the numbers on your actual salary, mileage and vehicle before committing to a lease or purchase.