Electric vehicles (EVs) are everywhere these days – from sleek Teslas to practical Polestars – and whilst the benefits for the planet are still under debate, they can be surprisingly tax-efficient, especially if you run a limited company. But is it always the best move to buy your EV through the business? Let’s weigh up the pros and cons.
The Pros
1. Company Pays for the Car – Not You Personally
If your limited company buys the car, it pays for it upfront (or via a lease or HP agreement). That means you’re not tying up your personal cash or credit, nor having to extract taxable funds from the business prior to purchase.
2. Big Tax Savings via Capital Allowances
Electric cars with zero emissions qualify for 100% first-year allowances. This means the company can deduct the full cost from its profits in the year of purchase, reducing your Corporation Tax bill.
Example: Buy a £40,000 EV, and you could save at least £7,600 in Corporation Tax (based on 19% CT).
3. Low Benefit-in-Kind (BiK) Tax
If you the company car is available for you to use personally (e.g. for the school run, the gym, or holidays), which it almost certainly is, it counts as a benefit – but EVs are treated kindly:
- 2025/26 BiK rate = 3%
- Compared to 25%+ for a petrol or diesel car
For a £40,000 EV, the BiK tax for a higher-rate taxpayer is only about £480 a year – not bad for personal use of a shiny new car!
4. Company Pays Running Costs
The company can cover:
- Insurance
- Servicing
- Repairs
- Charging (including installing a charger at home*)
- Road tax (applicable to EVs purchased from 1 April 2025)
And it gets tax relief on all of those.
5. VAT Benefits (Sometimes)
If the business leases the EV, it can usually reclaim 50% of the VAT on lease payments (more if there’s no personal use). VAT on running costs is generally reclaimable too.
The Cons
1. You’ll Pay Some Personal Tax (BiK)
Even though the tax is low, it’s still a personal cost. If you bought the car yourself, there’d be no BiK at all.
2. No AIA if It’s a Second-Hand EV
You only get the 100% capital allowance on new and unused electric vehicles. Used EVs still get relief – but it’s slower, at just 6% a year.
3. Company Pays VAT – But Can’t Always Reclaim It
If you buy the car outright, and there’s any private use at all, you can’t reclaim any VAT. This can be a frustrating sticking point.
4. You Might Lose Mileage Payments
If you use your own car for work travel, the company can pay you 45p per mile tax-free (for the first 10,000 miles). But if the company owns the car, you can't claim that – just a much smaller fuel reimbursement.
5. It’s Not Always the Best Use of Company Funds
A fancy car is a nice perk, but cash tied up in a depreciating asset could be better spent on growing the business or paying you dividends. If you are not completely sold on having an EV, an equivalent specification petrol car can be a lot cheaper to purchase initially, and lose less value over time, than an EV - even though your tax bill will be potentially higher. Make sure you make this decision with your eyes wide open.
Bonus Tip: Home Charger Installation
If the company installs a charger at your home for a company EV, the cost isn’t a taxable benefit (as long as it’s mainly for business purposes). A neat little perk.
So… Should You Do It?
Buying an electric car through your company can be a tax-savvy move – especially if you’re a director using the car for both work and personal travel.
But it’s not a one-size-fits-all answer.
✔️ If you want to drive a new EV, use it personally, and keep your salary and tax bills low – this can be a brilliant strategy.
❌ If you’re better off keeping the car personally and taking mileage, or if the company is low on cash, think twice.
Want to crunch the numbers based on your own situation?
Let’s have a chat – no jargon, no pressure, just practical advice that fits your business.
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