Looking to buy an electric car through your limited company?

Whilst there’s no doubt that electric vehicle ownership continues to grow in the UK, we’re here to help you figure out whether it makes sense for you to purchase an electric car through your own company.

It’s certainly not a new concept and plenty of people are doing it but it’s important that you understand how the different tax treatment works in order to be able to claim the tax benefits correctly.

Can I buy an electric car through my own limited company?

Yes, there are no restrictions when it comes to buying any type of vehicle through a limited company. However, the main concern is how much tax this will attract, in particular, where the vehicle is used for personal travel too.

This is because when a vehicle is bought through a company, HMRC assumes it is primarily used for business purposes but does not ignore the fact that it is likely to be used for personal travel as well. This situation creates a benefit-in-kind (BIK) and traditional petrol or diesel cars attract high BIK rates (or P11D tax as it’s sometimes referred to as). For this reason, it is not often advised that you buy a petrol or diesel car through a company unless it is to be used exclusively for business purposes (such as a pool car rather than a company car).

There are strict definitions and restrictions around pool cars however, so be sure you are familiar with these in order to not fall short of HMRC’s rules. However, buying an electric car through your company is a different story and explains why it is a popular option. Electric vehicles face far more favourable tax treatments, even when used for personal travel so many people opt to buy an electric car through their own company to maximise on tax savings.

Why is it better to buy an electric car through a limited company?

As the UK government seeks to meet their target of reaching net zero by 2050, one part of their strategy is to offer tax incentives to encourage more people to choose electric vehicles or ICE vehicles. Buying an electric car through your own company which you’ll also use for personal travel attracts far lower P11D tax rates than those of petrol or diesel vehicles.

Not only that, but whilst many electric car grants have now ended, some still remain that are available specifically to limited companies. These include the EV Infrastructure Grant for Staff and Fleets and the Workplace Charging Scheme.

What’s the tax difference between an electric car and a petrol or diesel car?

So, let’s give you an example to clearly illustrate what we mean by the favourable tax treatment. You could be surprised by how much tax you could really save. BIK tax is calculated in part by your own personal income tax rate, so we’ll use a basic rate taxpayer as a modest example.

For a petrol car with a list price of£40,000 the BIK rate can range between 16% – 39% but we’ll use an average of 30% for illustration purposes . To calculate the BIK, you would apply the 30% BIK rate to the car’s list price of £40,000 which equals £12,000. Then, applying the 20% basic income tax rate to this means you would need to pay £2,400 per year in BIK tax.

In comparison, an electric car with a list price of £40,000 only attracts a 3% BIK rate for the 2025/26 tax year (this is due to increase each tax year, but it remains significantly lower than petrol or diesel cars). Using the same method of calculation, you would apply the 3% BIK rate to the car’s list price of £40,000 which equals to £1,200. Then, again applying the same 20% basic income tax rate to this would mean you instead only have to pay £240 a year in BIK tax. That’s a whopping tax saving of £2,160 a year.

Can I claim the cost of an electric car against corporation tax?

Yes, you can, but only if it is purchased and owned by the company as opposed to you as the limited company director personally. Corporation tax relief is amongst one of the many tax benefits of purchasing an electric vehicle through a company.

Cars qualify for capital allowances when purchased by a limited company. This is not the case where a car is bought personally. Where a new, fully electric car is purchased, the full cost can be deducted from taxable profits for corporation tax purposes in the same year that it was purchased through the 100% First-Year Allowance. This is unlike ICE cars and second-hand electric cars, which instead can only be relieved over time via writing down allowances through either the main rate or special rate pool.

Were you to lease an electric car, then you’ll be able to claim the entire lease repayments as a business expenses which again helps you reduce your corporation tax bill. This is a further tax advantage of choosing an electric car because only petrol and diesel cars with CO2 emission of 50g/km or less can claim 100% of the lease repayments as a business expense. Cars with emissions above this threshold are restricted to 85% relief.

Can I reclaim the VAT on an electric car if I buy it through my company?

You can only reclaim the VAT on electric cars bought through limited companies where it has been purchased solely for business use. This means that if you intend to use the car for personal travel as well (including commuting to and from your home to your regular place of work) then reclaiming VAT is strictly disallowed. However, if you are leasing the car then 50% of the VAT can be reclaimed even where the car is used for personal travel. 100% of the VAT can be reclaimed from the lease payments if the car is genuinely used for business travel only.

Are there any tax savings for charging an electric car through limited companies?

When it comes to the cost of charging an electric company car there are various aspects to consider as to whether it can be claimed as a business expense and therefore deductible from your corporation tax liability.

Generally, any electric vehicle charging at a place of work is tax-deductible. Importantly, it does not amount to a BIK. This means that you could even charge your personally owned electric car at a workplace charging station and the company could claim the cost of the electricity against their profits with no tax charge to yourself.

Alternatively, if you chose to charge a company electric vehicle at your own home then it would be possible for you to be reimbursed for the electricity by the company. This cost would be an allowable business expense but only where it applies to the charging for business mileage. You would therefore need to keep accurate records to justify these expenses to HMRC.

The cost of charging at public charging points is treated in a similar manner. So long as it is for business mileage, where the company pays for it directly, both the cost and the VAT (so long as a valid VAT receipt is kept). If it is paid for personally and then reimbursed by the company it must be restricted to business miles only otherwise a P11D benefit could arise attracting a tax charge for you.

Is there tax relief on other running costs if I purchase an electric car through my company?

Another big advantage of buying or leasing an electric company car is that the company can claim tax relief against the running costs of the vehicle against the company’s tax bill. The following costs are tax-deductible for corporation tax purposes even where the car is available for business and personal use:

• Road tax (electric cars are no longer exempt from Vehicle Excise Duty (VED) and will soon pay 3p per mile as introduced by the 2025 Autumn Budget).
• The Expensive Car Supplement (applicable where the car’s list price is over £40,000, or £50,000 for EVs from April 2025).
• MOT costs
• Servicing and maintenance
• Car insurance
• Breakdown cover

It is important to be clear that although the cost of these can be claimed by the company, it does result in a P11D tax charge for you as the director where you use the car for personal travel. The P11D tax is still solely calculated on the car’s list price and your personal income tax rate, not on the extra running costs.

How to decide whether or not to buy an electric car personally or through a limited company

We’ve discussed many of the benefits of buying an electric car as well as particular rules on how to take advantage of them, but to help you decide and to summarise, we’ve created a created a full list of pros and cons for you to weigh up.

The advantages:

• 100% corporation tax relief on the purchase price of a new, fully electric car through the FYA, allowing the full cost to be deducted from taxable profits in the year of purchase.
• Very low BIK rates, making electric company cars one of the most tax-efficient benefits available to directors and employees.
• All running costs are tax-deductible, including servicing, repairs, insurance, MOTs, road tax and charging costs, even where there is personal use.
• No fuel benefit charge on electricity, unlike petrol or diesel company cars, significantly reducing personal tax exposure.
• Workplace charging is tax-free, with no P11D or BIK implications for employees or directors.
• Potential for further tax savings through salary sacrifice, where available. Electric cars provided via a salary sacrifice scheme remain company cars, are still taxed under the low EV BIK rules, and can deliver income tax and National Insurance savings for both the employee and employer when structured correctly.

The disadvantages:

• Personal use gives rise to BIK, meaning the individual pays income tax and the company may incur Class 1A National Insurance, even where private mileage is limited.
• VAT on the purchase of the car is usually irrecoverable, unless the vehicle is used 100% for business purposes with no private use, which is uncommon.
• Second-hand electric cars do not qualify for the 100% First-Year Allowance, so corporation tax relief is spread over time via writing down allowances instead.
• Cashflow considerations may prevent initial purchase altogether as the company must fund purchase or lease costs before corporation tax relief is realised.
• Home charging reimbursements require careful handling to avoid unintended tax or P11D consequences.
• Should you later choose to close down your company, the electric car remains a company asset or liability. It may need to be sold, returned to a leasing provider, or transferred to a director, which can trigger tax charges or early termination costs and reduce overall tax efficiency.
• It may not suit low-mileage directors, where a personally owned electric car with mileage claims could be more cost-effective overall.

Get support with your tax and accounting

If you’re a director planning to purchase a new electric car, make sure you claim the cost correctly against your corporation tax. Don’t forget to report any P11D benefit on both your company’s accounts and your personal tax return. For full peace of mind and maximum efficiency, speak with us about your needs — we can create a tailored tax service package designed specifically for you and your company.