Electric Vehicles & UK Tax: Post-Budget 2025 Overview

The 2025 Autumn Budget brought several important updates for electric vehicle owners, company car drivers, and businesses.

Below is a clear overview of the key measures and what they mean in practice.

1. Benefit in Kind (BiK) & Salary Sacrifice

The Benefit in Kind rate for fully electric company cars remains at 3% for 2025/26. Although this has risen from earlier years, it remains significantly lower than petrol and diesel vehicles, which can attract rates of up to 37%.

For employees, this results in materially lower income tax charges. Employers benefit from reduced Class 1A National Insurance. Salary sacrifice arrangements for electric vehicles remain highly tax efficient, with many employees experiencing monthly savings of 30–50% compared to personal leasing. This remains one of the strongest incentives for electric vehicle adoption.

2. Vehicle Excise Duty (VED) and Expensive Car Supplement

From April 2025, electric vehicles are no longer exempt from Vehicle Excise Duty. New electric cars now fall into the standard VED regime rather than benefiting from a zero rate first year.

From April 2026, the Expensive Car Supplement threshold for zero emission vehicles will increase from £40,000 to £50,000. This change brings more mid-range electric vehicles outside the surcharge, improving overall affordability.

3. Pay Per Mile Road Usage Charge (from April 2028)

The Autumn Budget 2025 confirmed that from April 2028, a pay-per-mile charge will apply to electric vehicles:

• Battery electric vehicles: 3p per mile

• Plug-in hybrids: 1.5p per mile

This measure is intended to partially replace declining fuel duty revenues. For an average driver covering around 8,500 miles per year, this could equate to approximately £255 annually.

While this reduces the historic running-cost advantage of EVs, it does not eliminate it, particularly for company car and salary sacrifice users.

4. Capital Allowances and Business Fleets

Businesses purchasing new zero-emission vehicles continue to benefit from 100% First Year Allowances.

This allows the full cost of the vehicle to be deducted against taxable profits in the year of purchase, delivering significant corporation tax savings.

Electric vehicle charging infrastructure can also qualify for allowances under plant and machinery rules, further supporting fleet adoption.

5. Charging Infrastructure Support

Government support for charging infrastructure continues, including workplace and residential charging grants and broader investment in public charging networks. These measures help reduce upfront installation costs and support the long-term viability of electric vehicles for businesses and individuals.

6. Overall Position – Is an EV Still Worth It?

Electric vehicles remain highly attractive for company car drivers and businesses, particularly where salary sacrifice, low BiK rates, and capital allowances apply. However, the cost landscape is shifting. Road tax now applies, and from 2028 mileage-based charges will increase running costs, especially for high-mileage users.

Despite these changes, electric vehicles continue to offer substantial tax and cost advantages relative to petrol and diesel vehicles, especially for structured business use.

Conclusion

The Autumn Budget 2025 confirms continued government support for electric vehicles, albeit alongside a gradual transition toward road-usage taxation.

For many clients — particularly company directors, employees using salary sacrifice, and businesses operating fleets — electric vehicles remain a financially compelling option.