Company car tax on electric vehicles is going up in April 2027. The Benefit in Kind (BIK) rate, that’s the percentage of a car’s list price you’re taxed on each year, jumps from 5% to 6%. If you’re considering a salary sacrifice EV, you might be wondering whether to sign up now and lock in the lower rate, or wait for newer models and potentially better deals.
I’ve run the numbers on what this actually costs, because “1% more” sounds trivial until you work out what it means for your monthly take-home pay.
What the 2027 increase actually costs you
Let’s use a specific example. Say you’re a 40% taxpayer considering a Tesla Model 3 Long Range with a list price of £50,990 through a salary sacrifice scheme.
At the current 5% BIK rate, you’d pay tax on £2,550 per year (5% of £50,990). As a 40% taxpayer, that’s £1,020 in tax annually, or £85 per month.
From April 2027 at 6% BIK, you’d pay tax on £3,059 per year. That’s £1,224 in tax annually, or £102 per month.
The difference is £204 per year, or £17 per month. Over a typical 36-month lease, that’s £612 in extra tax if you wait until after April 2027 to sign up.
For a 20% taxpayer on the same car, the numbers are exactly half: £102 extra per year, about £8.50 per month, or £306 over three years.
But what if deals get better?
Here’s where it gets more interesting. Electric vehicle lease prices have been falling. A car that costs £450 per month now through salary sacrifice might be £400 in six months, either because of manufacturer incentives, increased competition, or dealers trying to shift older stock when new model years arrive.
If you’re a 40% taxpayer and you wait six months, you need the lease price to drop by at least £17 per month just to break even on the BIK increase. Anything beyond that and you’re ahead.
For context, I’ve seen salary sacrifice prices on popular models like the MG4 and Volkswagen ID.3 drop by £30 to £50 per month over the past year as supply has improved and manufacturers have offered stronger support.
The newer model question
There’s also the question of what you’re actually getting. Sign up now and you might get a 2024 or early 2025 model. Wait until summer 2025 and you could be looking at facelifted versions, improved battery chemistry, or entirely new models that weren’t available before.
Some examples: Kia is launching the EV3 in 2025, which will likely appear on salary sacrifice schemes. The facelifted Hyundai Kona Electric with a bigger battery is already filtering through to some providers. Tesla occasionally updates the Model 3 and Model Y with hardware improvements mid-cycle.
Whether a newer model is worth the BIK increase depends entirely on what changes. A 5% range improvement probably isn’t worth £204 per year extra in tax. A genuinely better car with faster charging or improved driver assistance might be.
When locking in now makes sense
You should probably commit before April 2027 if:
You’re a 40% or 45% taxpayer, where the BIK increase costs you more in absolute terms. For a 45% taxpayer on that £50,990 Model 3, the increase is £229 per year.
You’ve found a car and deal you’re genuinely happy with at current prices. There’s no point waiting for a hypothetical better deal if you’d be perfectly satisfied today.
Your current car is costing you money. If you’re running an old petrol car with expensive fuel and maintenance costs, six months of waiting could easily cost more than the BIK saving.
You’re at the end of a current lease cycle anyway. If your existing salary sacrifice car is due back in the next few months, you’re not waiting, you’re just choosing your next vehicle.
When waiting might be worth it
Consider holding off if:
You’re a 20% taxpayer and the numbers are smaller. An extra £8.50 per month might be worth it for a notably better vehicle or deal.
You’re interested in a specific model that’s getting a significant update soon. If you want a Kia EV6 and the GT-Line is getting a bigger battery in six months, that might matter more than £17 per month.
Your salary sacrifice provider has historically offered strong deals, and you’ve seen prices drop before. Some providers are more aggressive with pricing than others.
Your current car situation is stable. If you’re running a reliable, cheap-to-run vehicle and there’s no urgency, waiting gives you more information.
What to do right now
Check what your salary sacrifice provider is currently offering and get specific quotes. Providers like Octopus Electric Vehicles, LoveElectric, and Tusker publish their monthly costs online, so you can see exactly what today’s price is.
Then monitor those prices over the next few months. If they’re staying flat or increasing, signing before April 2027 is straightforward. If they’re dropping noticeably, you’ll need to weigh the BIK increase against better deals.
And remember that BIK rates are set until April 2028, when they rise again to 7%, then 8% in 2029 and 9% in 2030, all at the time of writing. So the advantage of locking in now extends through your entire lease term. A three-year lease starting in March 2027 pays 5% for year one, 6% for year two, and 7% for year three. A lease starting in May 2027 pays 6%, 7%, and 8%. Over three years on that £50,990 car, that’s £1,020 versus £1,224 in year one, identical in year two, and £1,428 versus £1,632 in year three. The total difference is £612 over the full term for a 40% taxpayer.
If you’re already planning to get a salary sacrifice EV and you’ve found a car you like at a price that works, there’s a clear financial benefit to committing before April 2027. But if you’re ambivalent or the market looks like it’s moving in your favour, £17 per month isn’t so much that you should rush into the wrong car.