The four-year BIK cliff: what happens to electric company car tax between 2026 and 2030.

9 min read · 4 August 2026. Electric company car tax is not staying cheap. It is climbing a staircase that more than doubles the bill in four years, and from April 2028 a second, largely unnoticed charge lands on top: eVED, the pay-per-mile rate announced at Autumn Budget 2025.

An employee who orders a £40,000 EV on a four-year cycle today will pay tax on 4% of its value in year one and 9% by year four. Their employer's Class 1A National Insurance climbs with it, and a per-mile charge arrives mid-cycle. Electric cars remain dramatically cheaper than petrol or diesel throughout. But "dramatically cheaper" and "fixed cost" are different promises, and the difference is exactly why how you fund the car now matters as much as which car you choose.

The cliff, stated plainly

The appropriate percentage for a zero-emission company car rises every year to 2029/30. These are the confirmed rates, not projections.

The EV rate rises 125% between 2026/27 and 2029/30, and as the worked example below shows, a 40% taxpayer's annual bill rises by exactly the same 125%. The figure holds whether you measure the rate or the money.

The worked example: a £40,000 EV ordered today

Four-year cycle, P11D £40,000, delivery in 2026/27. Every value below was generated from the same tax engine that powers our calculators.

A 40% taxpayer pays £4,000 over the cycle on a car that was recently marketed as a 2% tax benefit. The employer adds £1,500 in Class 1A National Insurance.

Then add eVED from April 2028: 3p per mile for electric cars, 1.5p for plug-in hybrids. At an assumed 10,000 miles a year that is £300 in each of years three and four, £600 across the cycle, effectively a second BIK-sized line item. High-mileage drivers pay proportionally more, so 25,000 miles a year means £750 annually.

The comparison that keeps EVs winning anyway

Set the same £40,000 P11D against its petrol and diesel equivalents at 2026/27 rates, for a 40% taxpayer.

• Diesel, 152 g/km (RDE2-compliant, which any new diesel will be): 36% band, £14,400 BIK value, £5,760 a year
• Petrol, 125 g/km: 31% band, £12,400 BIK value, £4,960 a year
• Electric at the very top of its cliff (2029/30, including £300 of eVED): £1,740 a year

Even in its worst year, the electric car's driver cost is 65% to 71% lower than the equivalent petrol or diesel. The diesel costs 3.4 times as much; the petrol 2.85 times. The cliff narrows the gap. It nowhere near closes it.

The plug-in hybrid cliff nobody has priced

The steepest change in the whole schedule is not the electric one. A £40,000 long-range plug-in hybrid (130 or more miles of electric range, 32 g/km) sits at 5% in 2027/28, then jumps to 18% in 2028/29. That is £800 to £2,880 for a 40% taxpayer in a single year: a 3.6 times increase, far steeper than anything in the EV cliff, and it lands on precisely the vehicles marketed as the smart hybrid choice.

By 2029/30 every plug-in hybrid band converges on 19%. The entire electric-range advantage in the tax system disappears.

Figures show the appropriate percentage and the annual cost to a 40% taxpayer on a £40,000 P11D. Plug-in hybrids also attract eVED at 1.5p per mile from 2028, which is £150 a year at 10,000 miles.

What the cliff changes

• Fleets signing four-year cycles in 2026 are signing into the whole staircase. The rational response is whole-cycle costing, not year-one costing.
• eVED is the sleeper. The rate rises are diarised and visible. The per-mile charge arriving mid-cycle is the one most finance directors have not modelled.
• The plug-in hybrid convergence is the decision-changer. Anyone choosing a long-range PHEV for its tax treatment is buying one good year.
• None of this reverses the electric case. It professionalises it. The gap stays 65% to 71% wide at its narrowest, but capturing it now takes arithmetic instead of a rule of thumb.

The funding answer: salary sacrifice on whole-cycle numbers

Here is the part the staircase does not touch. A salary-sacrifice driver funds the car from gross pay, so every sacrificed pound escapes income tax and employee National Insurance. That is a saving of 42% for a higher-rate taxpayer and 28% at basic rate, before the Benefit-in-Kind is handed back.

The BIK is the price of that arrangement, and the cliff raises it from 4% to 9% of P11D. The exchange remains lopsided in the driver's favour the whole way up: giving up gross salary at a 42% saving to take back a benefit taxed at single-digit percentages is the arbitrage that makes an electric car on salary sacrifice cheaper than the same car funded from net pay in every year of the cycle, including 2029/30 at the top of the cliff. The employer keeps its own version of the same win, saving 15% Class 1A National Insurance on the sacrificed salary against the 15% due on the much smaller BIK value.

What the cliff does change is the standard of quoting. A quote built on year-one rates flatters the deal by four figures over a cycle. The honest quote prices the whole staircase. That is how Perx is built: whole-cycle, all four tax years, both sides of the arbitrage, using the same engine that generated every number in this analysis.

A real quote, not a model

The example above uses a round £40,000 EV and a 40% taxpayer. Here is the same arithmetic from an actual Perx illustration: a Ford Puma Gen-E (P11D £29,929.99), £40,000 salary, basic-rate taxpayer, 48 months, 10,000 miles a year.

One property worth noticing: because the whole sacrifice sits inside the basic-rate band, these figures are identical for any basic-rate earner. Whether you are on £35,000 or £48,000, this is your quote.

The BIK line is the cliff in miniature. It starts at £19.95 a month in year one and steps with the 4/5/7/9 schedule to a term total of £1,496.50, because the quote prices the full stepped schedule rather than flattering the deal with year one alone. The relief line is the arbitrage doing its work: even in the car-only case, £5,779 of tax and National Insurance relief against £1,497 of stepped BIK. The employer's Class 1A obligation is fully offset inside the structure, leaving a monthly National Insurance surplus per car.

The home energy bundle adds a home charge point and 4kW solar, relieved within the vehicle package under optional remuneration arrangement rules using an HMRC-cleared scheme structure. The electric car is the qualifying anchor, and solar, home charger and battery storage take relief alongside it. Without the EV, the energy items do not qualify. Bundle figures include QBE motor insurance and Life Event cover. Individual circumstances vary, so seek your own tax advice.

The cliff makes salary sacrifice more valuable, not less. The higher the BIK climbs, the more it matters that the funding method claws back 42% on every pound.

Frequently asked questions

What is the BIK rate for electric cars in 2026/27?

The appropriate percentage for a zero-emission company car is 4% in 2026/27. It rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. On a £40,000 car, 4% gives a taxable benefit of £1,600, which costs a 40% taxpayer £640 a year.

How much will electric company car tax rise by 2030?

The rate rises from 4% in 2026/27 to 9% in 2029/30, an increase of 125%. A 40% taxpayer with a £40,000 electric car sees their annual bill rise from £640 to £1,440 across the same period, which is the same 125% increase. Over a full four-year cycle the total is £4,000.

What is eVED and when does it start?

eVED is a pay-per-mile charge on electric and plug-in hybrid vehicles, announced at Autumn Budget 2025 and applying from April 2028. The rate is 3p per mile for battery electric vehicles and 1.5p per mile for plug-in hybrids. At 10,000 miles a year that is £300 or £150 respectively. It is charged on miles driven and is separate from company car tax.

Why do plug-in hybrid BIK rates jump in 2028/29?

Plug-in hybrids emitting 1 to 50 g/km are currently banded by electric-only range, so a long-range PHEV can sit as low as 5%. From 2028/29 that banding is removed and all such vehicles take a flat 18%, rising to 19% in 2029/30. A long-range plug-in hybrid therefore goes from 5% to 18% in one year, a 3.6 times increase in the driver's tax.

Are electric company cars still worth it after the rate rises?

Yes, by a wide margin. Even in 2029/30 at the top of the schedule and including eVED, a £40,000 electric car costs a 40% taxpayer £1,740 a year. The equivalent 152 g/km diesel costs £5,760 and a 125 g/km petrol costs £4,960 at 2026/27 rates. The electric car remains 65% to 71% cheaper.

Does the BIK rise make salary sacrifice less attractive?

No. Salary sacrifice funds the car from gross pay, so a higher-rate taxpayer saves 42% on every pound sacrificed and a basic-rate taxpayer saves 28%, against a benefit still taxed at single-digit percentages. The higher the BIK climbs, the more the funding method matters. What changes is the standard of quoting: a quote built on year-one rates understates the cost over a four-year cycle.

Methodology and data

All rates come from the open dataset github.com/orbis-io/uk-bik-rates (v1.0.0, MIT licensed), which is generated from the same unit-tested engine behind the OrbisIO calculators. Every figure in this analysis was programmatically generated from that engine rather than transcribed by hand, so the analysis, the dataset and the calculator cannot disagree with one another.

eVED figures assume 10,000 miles a year unless stated otherwise. Salary-sacrifice saving rates assume 2026/27 income tax and National Insurance bands. This is reference data and analysis, not tax advice.