The government has confirmed that company car tax rates for electric vehicles will remain at 5% for 2027/28, following the rates already set for 2025/26 and 2026/27. If you’re in an EV salary sacrifice scheme or considering one, here’s what this means for your monthly take-home pay and whether you should act now or wait.
The 2027 rates in plain English
Company car tax, officially called Benefit in Kind (BIK), is what you pay on the value of having a company car for personal use. The rate for zero-emission vehicles will be 5% of the car’s list price in the 2027/28 tax year, exactly the same as the two years before it.
For context, petrol and diesel cars attract BIK rates of 25% to 37% depending on their emissions. This enormous gap is what makes EVs so attractive as company cars, particularly through salary sacrifice schemes where your employer leases the car and you pay for it from your pre-tax salary.
After 2027/28, the rates haven’t been set yet. The Treasury typically announces company car tax rates several years in advance to help businesses plan, but we’re now looking into the fog beyond April 2028.
What this costs in actual money
Let’s use real examples. Take a MG4 Trophy Long Range with a list price of around £33,000. At 5% BIK, the taxable benefit is £1,650 per year. If you’re a basic rate taxpayer (20%), you’ll pay £330 per year in company car tax, or about £27.50 per month. Higher rate taxpayers (40%) pay £660 per year, roughly £55 per month.
Now compare that to a Tesla Model Y Long Range at approximately £55,000. The 5% BIK gives a taxable benefit of £2,750 per year. Basic rate taxpayers pay £550 annually (about £46 per month), while higher rate taxpayers pay £1,100 per year (around £92 per month).
These are the amounts you pay in tax on top of your salary sacrifice deduction, which itself reduces your gross salary. The total monthly cost of your salary sacrifice deal includes the lease payment (taken before tax and National Insurance), plus this BIK tax (taken after).
Should you lock in a deal now?
Here’s where it gets interesting. Most salary sacrifice schemes offer lease terms of two to four years. If you’re signing up now in early 2025, a three-year deal takes you to early 2028, just beyond the confirmed 5% rate.
Your BIK rate is typically locked in for the duration of your lease based on the rates when you sign up, though the actual percentage you pay adjusts each April to whatever rate applies to your vehicle that year. What matters is that EVs remain at low BIK percentages.
The risk of waiting is that rates after 2027/28 could increase. Even a rise to 7% or 8% would add several pounds to your monthly tax bill. On that £33,000 MG4, an increase from 5% to 8% would cost a basic rate taxpayer an extra £198 per year (about £16.50 per month), or £396 per year (roughly £33 per month) for higher rate taxpayers.
The advantage of waiting is that lease costs themselves might fall as EV prices continue to drop and supply improves. You might also get access to newer models with better range and features.
What salary sacrifice providers are saying
Major providers like Octopus Electric Vehicles, Loveelectric, and The Electric Car Scheme are continuing to sign people up as normal. They’re confident that EV company car tax will remain significantly lower than petrol and diesel equivalents, even if the exact percentage rises slightly after 2027/28.
Most schemes let you hand the car back early if your circumstances change, though you’ll typically need to give three months’ notice and may face an early termination fee. Check your specific scheme’s terms before signing anything.
The practical takeaway
If you’re eligible for salary sacrifice and planning to get an EV anyway, the confirmed 5% rate through 2027/28 removes one element of uncertainty. A three-year deal starting now gives you fixed costs through most of that period. Just remember that rates beyond April 2028 aren’t set, so factor in a possible modest increase if your lease extends past that date. Check with your employer’s scheme administrator about how rate changes would affect your specific agreement, and always verify the total monthly cost including both the salary sacrifice amount and the BIK tax you’ll pay.