Electric Cars & BIK Tax: A Smart Move for UK Company Directors in 2025
As a tax accountant working with directors of limited companies, one of the most common questions I’m asked is: "Is it really worth buying an electric car through my company?" And my answer is a resounding yes—if done correctly.
As a UK company director, you're probably always looking for ways to reduce your tax liability while staying fully compliant with HMRC rules. One of the most tax-efficient decisions you can make in 2025 is to purchase an electric vehicle (EV) through your limited company.
At Crypto Tax Accountants, we specialise in helping directors of limited companies—including those in crypto, tech, and finance—make smart financial decisions. In this blog, we explain how Benefit in Kind (BIK) tax applies to electric cars, what the P11D form means for you, and how you can save thousands in tax.
🔍 What Is Benefit in Kind (BIK) Tax?
When a company provides an employee or director with a non-cash benefit—like a company car used for personal travel—HMRC treats this as a Benefit in Kind (BIK). This benefit is taxable and must be declared annually via a P11D form.
The BIK tax is calculated based on:
The list price of the vehicle (not what the company paid), and
Its CO₂ emissions.
For petrol or diesel vehicles, BIK rates can range from 25% to 37% of the vehicle's list price. But electric vehicles? They're taxed at a fraction of that rate.
⚡ BIK Rates for Electric Cars (Updated for 2025)
Thanks to the UK government’s green agenda, electric company cars benefit from significantly lower BIK rates. Here's how the rates look now and in the coming years:
Tax Year
2024/2025 2%
2025/2026 3%
2026/2027 4%
2027/2028 5%
That means even high-value electric vehicles result in very low personal tax bills for directors.
📄 What Is a P11D and Why Does It Matter?
If your company provides you (as a director) with an electric car that you also use personally, it must be reported on a P11D form. This form:
Details the value of any benefits you’ve received from the company,
Is submitted annually to HMRC,
Triggers both personal income tax and Class 1A National Insurance Contributions (NICs) for the company.
Filing your P11D correctly is essential to stay compliant with UK tax law. Mistakes can lead to penalties or HMRC inquiries.
💰 Example: How Much Tax Could You Save?
Let’s say your limited company provides you with a Tesla Model Y, with a list price of £50,000.
2024/25 Tax Year
BIK rate: 2%
Taxable benefit: £50,000 × 2% = £1,000
As a 40% taxpayer, your personal tax = £400/year
The company pays Class 1A NICs = £1,000 × 13.8% = £138/year
Compare this to a diesel car with a 30% BIK rate:
Taxable benefit = £15,000
Personal tax = £6,000/year
Company NICs = £2,070/year
Total tax saving: Over £5,500 annually—just by switching to electric.
🏆 Key Tax Benefits of Buying an Electric Car Through Your Limited Company
✅ Low BIK rates = minimal personal tax liability
✅ Corporation tax relief on capital allowances or lease payments
✅ VAT recovery on lease costs (50% of VAT reclaimable if used for both personal and business use)
✅ Exempt from road tax (VED) and congestion charges in many areas
✅ Class 1A NICs significantly lower than petrol/diesel vehicles
🧾 Why Crypto Tax Accountants?
At cryptotaxaccountants.co.uk, we’re more than crypto experts. We’re business tax advisors who understand how to help directors optimise their finances using legitimate, HMRC-compliant strategies—including electric vehicles, capital allowances, and P11D reporting.
If you're a company director considering an electric car in 2025, we can:
Assess your eligibility
Run personalised tax-saving calculations
Handle your P11D submissions
Ensure full compliance with HMRC
⚙️ Ready to Go Electric and Save?
Don’t miss the opportunity to make a smart, eco-friendly, and tax-efficient business decision. Whether you're in crypto, consultancy, or creative industries, we’ll help you stay compliant and save money.
📞 Book a free consultation today atcryptotaxaccountants.co.uk or email us at info@cryptotaxaccountants.co.uk
