If you’ve been eyeing up a salary sacrifice EV deal, you’ve probably heard that company car tax rates are going up in April 2027. The rate for electric cars will increase from 5% to 6% of the vehicle’s list price, which sounds like it could be significant. But how much will it actually cost you, and is it worth rushing into a decision before the deadline?
The short answer: for most people, the difference is smaller than you’d think. But let’s run the actual numbers.
The 1% Increase in Real Money
Company car tax, officially called Benefit in Kind (BIK), is charged as a percentage of a car’s list price, treated as taxable income. With EVs, that percentage is currently 5% and will rise to 6% from April 2027.
Let’s say you’re looking at a Tesla Model 3 Long Range with a list price of £50,000, and you’re a 40% taxpayer. Here’s what you’d pay:
At 5% BIK (before April 2027):
£50,000 × 5% = £2,500 taxable benefit
£2,500 × 40% = £1,000 per year in tax, or £83 per month
At 6% BIK (from April 2027):
£50,000 × 6% = £3,000 taxable benefit
£3,000 × 40% = £1,200 per year in tax, or £100 per month
The difference? £200 per year, or about £17 per month. Over a typical four-year lease, that’s £800 total.
For a 20% basic rate taxpayer, the same car would cost an extra £100 per year (about £8 per month), or £400 over four years.
Different Cars, Different Impacts
The actual cost difference scales with both the car’s price and your tax band. Here are some real-world examples based on current list prices:
MG4 Trophy (£32,000 list price):
40% taxpayer: £128 extra per year, £512 over four years
20% taxpayer: £64 extra per year, £256 over four years
Volkswagen ID.4 Pro (£45,000 list price):
40% taxpayer: £180 extra per year, £720 over four years
20% taxpayer: £90 extra per year, £360 over four years
Polestar 3 Long Range (£72,000 list price):
40% taxpayer: £288 extra per year, £1,152 over four years
20% taxpayer: £144 extra per year, £576 over four years
Even with a relatively expensive car, we’re talking about the cost of a few nice meals out per year for most people, not thousands of pounds.
What Happens If You’ve Already Signed
Here’s the crucial bit: if you sign a salary sacrifice agreement before April 2027, you’re locked in at the 5% rate for the entire duration of your lease, even if that runs past 2027. The BIK rate is set when you receive the car, not on a rolling annual basis.
This means if you take delivery of a car in March 2027 on a four-year lease, you’ll pay 5% BIK until March 2031. If you wait until May 2027, you’ll pay 6% for the full term.
Should You Rush?
Probably not, unless you were already about to sign anyway. Here’s why:
Choosing the wrong car because you felt pressured to decide quickly could cost you far more than the BIK increase. If you pick a car with 20 fewer miles of real-world range than you need, or one that doesn’t fit your family comfortably, you’ll regret it for the next three or four years.
Salary sacrifice deals are also changing all the time. Providers regularly update their offerings, new models arrive, and prices shift. The car you want might be cheaper in six months, wiping out any BIK savings and then some.
And remember, these rates may change again anyway. At the time of writing, the government has only confirmed BIK rates through to 2027-28. What happens after that is anyone’s guess, though there’s generally cross-party support for keeping EV company car tax competitive.
When Timing Actually Matters
That said, if you’re already in the market and you’ve narrowed down your choice, signing before April 2027 does lock in a genuine saving. For a higher-rate taxpayer taking a £50,000 car, that’s £800 over four years. It’s not life-changing money, but it’s not nothing either.
If your employer’s salary sacrifice scheme has a specific ordering deadline to guarantee delivery before April 2027, it’s worth knowing that date. Most providers need at least 8 to 12 weeks between signing and delivery, though this varies by manufacturer and model popularity.
The practical takeaway: don’t let the 2027 BIK increase panic you into a hasty decision, but if you’re ready to commit and you can take delivery before April 2027, you’ll save a modest but real amount. Work out what the difference actually means for your budget using your own tax band and the specific car you’re considering, then decide whether it’s enough to matter.