If you’re wondering whether to buy an EV through your business, you’re not alone. Around 90% of UK small business owners say they would be happy to switch to electric vehicle when upgrading work vehicles.
The Confused.com study that surveyed 500 business owners found almost a quarter of those questioned said they would consider an EV due to running costs. And that’s not surprising as the battle over the Strait of Hormuz continues, which is leading to a rise in the price of oil.
Such concerns appear to have helped boost EV car sales. In June 2026, the number of EVs in the UK smashed through the 2 million barrier. That means they account for 6% of the total cars on Britain’s roads. Just four years ago, only 2% of cars in the UK were EVs.
So, are you one of those wondering whether you should buy an EV through your business? Here’s all you need to know…
Ready to buy an EV through your business?
If you want to buy an EV through your business, then you need to weigh up the pros and cons. Using your company to buy an EV is one of the most tax-efficient ways to run a car. But there are things to consider first, such as:
- How will you use the car?
- Is your company profitable?
- How long do you intend to keep the car?
Once you have all the facts, you can then decide whether it’s right for you. EVs are driving growth in new car sales, but they might not be everyone. Remember, they’re also more expensive to insure, according to latest data. That’s largely due to them costing more to repair and fixing them takes longer.
Why buy an EV through your business
EVs are proving more popular than ever, as the latest sales figures mentioned above show. So, if you’re about to buy one through your business, here are some of the points you need to think about before making a purchase.
1. Low Benefit-in-Kind (BiK) tax
A Benefit-in-Kind is what you pay for an asset that you personally use. Cars are the most obvious example of a BiK. An employee who has a company car will expect to use it outside of their job, including commuting. As a result, they pay a tax as it’s a ‘perk of the job’.
Fully electric company cars have the lowest BiK rate, so that’s a key benefit for you if you drive a company car. If you’re a higher-rate taxpayer than that can amount to thousands of pounds of savings over several years.
2. Corporation Tax relief
Buying a new fully electric car through your company means you can claim 100% ‘first year allowance’ against your Corporation Tax bill. It also applies to any charging stations you install at an employee’s home address.
The allowance only applies to vehicles you buy outright or through hire purchase and it must be a new car, not used. You cannot claim the relief on leased vehicles, which includes PCP type agreements. When you sell the vehicle, you will need to pay Corporation Tax on any proceeds from the sale.
The monthly payments paid on a leased vehicle is treated as an allowable expense. This reduces taxable profits, which means a reduction in Corporation Tax.
All commercial vehicles qualify for 100% allowances under the Annual Investment Allowance.
3. VAT recovery
If your company leases the vehicle, it might be able to recover some VAT. But it all depends on the business use.
Should you buy the EV outright, VAT recovery is only available where there is no private use at all. This is uncommon for directors of companies, so keep that in mind.
4. EV grants
One benefit of buying an EV through your business is that there are Electric Car Grants available from the government. They aren’t as generous as they used to be, but you can still benefit from a grant of up to £3,750 for cars costing less than £37,500. Dealers make the deduction at checkout, so there’s no need to apply.
5. Mileage-based charges
From April 2028, there will be a new mileage-based tax on EVs. So, consider this before deciding to buy an EV through your company if you’re going to be keeping it past April 2027. The charges will be:
- £0.03 per mile for battery electric cars
- £0.015 per mile for plug-in hybrids
The rates will increase each year in line with the Consumer Price Index. While this might seem a backward step, you will still be paying around half the level of fuel duty on ICE cars if you’re travelling the average of 8,500 miles annually.
6. High depreciation
There are other cost considerations when buying an EV through your business. One of those is that depreciation is steeper than ICE cars in their first 3 years. EVs retain around 39% of their value compared to 56%-60% for those powered by diesel or petrol.
The depreciation depends on the make and model, and long-range EVs hold their value much better.
7. Electricity expenses
When you’re driving an ICE car that’s bought through your company, you would expect to use a fuel card as the fuel is treated as BiK.
But electricity used to charge an EV isn’t treated the same. So, employers must decide whether to:
- Pay for all charging and recover the cost
- Reimburse costs claimed by the employee
- Deduct private mileage – including commuting – through payroll deduction
Electricity costs are fully tax-deductible for companies.
Should I buy an EV through my business?
If you’re still wondering if it’s a good idea to buy an EV through your business, then we can help. Contact our friendly team for a no-obligation chat today.
