New vs Used EV Tax Explained – Capital Allowances, BIK, VAT, Grants and Mileage for 2026/27

By Steve Bicknell FCMA, CGMA

You have found two electric cars.

One is brand new.

The other is two or three years old.

The second-hand car may be thousands of pounds cheaper — but the new car could potentially qualify for 100% First-Year Capital Allowances.

So which is actually better?

For a limited company in 2026/27, the answer is more complicated than simply comparing the purchase prices.

You need to consider:

• 100% capital allowances on qualifying new EVs;
• 14% writing-down allowances on second-hand EVs;
• the 4% electric company-car Benefit in Kind rate;
• the original list price of a second-hand car;
• Corporation Tax;
• VAT;
• government EV grants;
• charging costs;
• business mileage;
• depreciation;
• Vehicle Excise Duty;
• finance;
• and what happens when you eventually sell the car.

And there is a third option which shouldn’t be overlooked:

BUY THE EV PERSONALLY AND CLAIM 55P PER BUSINESS MILE.

Let’s compare them.

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Quick Answer – New EV, Used EV or Personal Ownership?

	New EV – Company	Used EV – Company	Personally Owned EV
Company funds purchase	Yes	Yes	No
100% zero-emission FYA	Potentially yes	No	No company CA
Capital allowances	Potentially 100%	Normally 14% WDA	—
2026/27 EV BIK	4%	4%	None
BIK based broadly on original list price	Yes	Yes	—
Electric Car Grant	Potentially	No	Potentially on eligible new EV
AMAP – first 10,000 business miles	No	No	55p
Company owns car	Yes	Yes	No
VAT on purchase with private availability	Usually blocked	Usually blocked	—
Initial depreciation	Potentially high	Often substantially absorbed already	Personal cost

The biggest tax difference between buying a new and second-hand EV through your company is generally the timing of the:

CAPITAL ALLOWANCES.

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Why Are New Electric Cars So Tax-Efficient?

A qualifying new and unused zero-emission car can currently qualify for a:

100% FIRST-YEAR ALLOWANCE

That potentially allows the company to deduct the entire qualifying cost from taxable profits in the relevant accounting period.

For Corporation Tax purposes, the current relief runs until:

31 MARCH 2027

and for Income Tax purposes until:

5 APRIL 2027.

This relief is particularly valuable because cars are excluded from:

• Annual Investment Allowance;
• Full Expensing;
• and the general 40% First-Year Allowance.

A qualifying new zero-emission car has its own specific 100% FYA.

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Example – £50,000 New Electric Car

Suppose Consultancy 4 Business Ltd buys a qualifying brand-new zero-emission car for:

£50,000

Potential First-Year Allowance:

£50,000 × 100% = £50,000

If the company obtains tax relief at 25%, the simple illustrative Corporation Tax reduction is:

£50,000 × 25% = £12,500

POTENTIAL CT SAVING: £12,500

That is an extremely valuable timing advantage.

But it does not mean a £50,000 EV really costs £37,500.

The company has still spent £50,000 and needs to consider depreciation, finance, running costs, BIK and eventual disposal.

The actual Corporation Tax benefit also depends on the company’s taxable profits and applicable Corporation Tax rate.

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What Counts as New and Unused?

Don’t assume that:

“new to me”

means:

“new and unused”

for capital allowance purposes.

The conditions need to be checked.

Limited mileage arising from matters such as delivery, testing, customer test drives or demonstrator use does not necessarily mean a vehicle is second-hand.

Similarly, pre-registration does not automatically prevent qualification.

So if you’re considering a:

PRE-REGISTERED EV

or:

DEMONSTRATOR

it is worth checking the facts before assuming the 100% allowance has been lost.

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What About a Second-Hand Electric Car?

A second-hand EV does not qualify for the special 100% zero-emission car FYA.

Instead, a zero-emission car will generally fall within the:

MAIN-RATE CAPITAL ALLOWANCE POOL.

The main writing-down allowance rate reduced from 18% to:

14%

from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax.

Accounting periods spanning the change can have a hybrid rate.

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Example – £50,000 Second-Hand EV

Suppose Consultancy 4 Business Ltd instead pays:

£50,000

for a second-hand zero-emission car.

Using a simple full-year 14% illustration:

£50,000 × 14% = £7,000

At an illustrative 25% Corporation Tax rate:

£7,000 × 25% = £1,750

Compare that with our qualifying new car:

	New EV	Used EV
Purchase price	£50,000	£50,000
Illustrative first-year CA	£50,000	£7,000
Illustrative CT reduction @25%	£12,500	£1,750
Difference in first-year CT relief		£10,750

That is a very substantial difference.

But it is primarily a difference in the timing of tax relief.

The second-hand EV hasn’t necessarily lost all the remaining capital allowances — they are generally obtained more slowly.

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But the Used EV Could Be £20,000 Cheaper

This is where tax relief can distract from the real commercial decision.

Suppose the choice is:

Brand-new EV

£50,000

versus:

Three-year-old equivalent

£30,000

The new EV may potentially produce a £50,000 FYA.

The £30,000 used EV would have an illustrative first-year 14% WDA of:

£30,000 × 14% = £4,200

At 25% CT, that’s an illustrative first-year tax reduction of:

£1,050

But the used car required:

£20,000 LESS CASH

to buy.

That’s considerably more than the difference in our illustrative first-year Corporation Tax savings.

So remember:

DON’T SPEND £1 SIMPLY TO SAVE 25P OF TAX.

Tax is only part of the calculation.

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Are There Still Government Grants for Electric Cars?

YES.

The Government’s Electric Car Grant currently gives discounts on qualifying new zero-emission cars.

There are two grant bands:

Band 1

UP TO £3,750

Band 2

UP TO £1,500

You don’t normally claim the grant yourself.

The seller applies the grant as a discount to the purchase price.

But not every electric car qualifies.

The scheme applies to approved vehicles satisfying conditions including zero tailpipe emissions, minimum range, warranties, sustainability requirements and price limits.

The main Electric Car Grant price cap is currently £37,000 RRP, although particular rules can allow certain variants in the same interpolation family up to £42,000.

That means our hypothetical £50,000 new EV would not ordinarily qualify for the standard Electric Car Grant.

This is important — don’t add £3,750 to the tax saving on a £50,000 car unless the particular vehicle actually qualifies.

The list of eligible vehicles changes, so check the current Government list before ordering.

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New EV – Potential Double Advantage

For an eligible qualifying new EV, there could therefore be:

ELECTRIC CAR GRANT

plus:

100% FIRST-YEAR ALLOWANCE

plus the low:

4% EV BIK RATE.

That can significantly narrow the economic difference between a new and nearly-new EV.

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Benefit in Kind – New and Used EVs Get the Same Percentage

The low Benefit in Kind rate remains one of the biggest attractions of putting an EV through a limited company.

For a zero-emission company car, the appropriate percentage is:

2026/27

4%

2027/28

5%

2028/29

7%

2029/30

9%

So a second-hand EV doesn’t suffer a higher percentage simply because it is used.

But there is a trap.

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BIK Uses List Price – Not What You Paid Second-Hand

Suppose your company buys a three-year-old EV for:

£30,000

but its relevant original list price was:

£50,000.

The company-car BIK is broadly based on the relevant list price and taxable accessories — not the £30,000 your company paid.

At 4%:

£50,000 × 4% = £2,000 taxable benefit

So the BIK could broadly be the same as on a brand-new £50,000 EV.

THE USED PRICE FALLS.

THE BIK LIST PRICE DOESN’T FALL WITH IT.

This is an important consideration when looking at heavily depreciated premium EVs.

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What Does a £2,000 EV Benefit Actually Cost?

For a £50,000 relevant list price and a 4% BIK percentage:

TAXABLE BENEFIT = £2,000

Illustratively, the employee/director’s Income Tax could be:

Tax rate	Illustrative tax
20%	£400
40%	£800
45%	£900

The company will also normally pay Class 1A National Insurance.

Even after allowing for that, the BIK can remain dramatically lower than on many petrol or diesel company cars.

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New £50,000 vs Used £30,000 – The Interesting Comparison

	New EV	Used EV
Company purchase price	£50,000	£30,000
Original list price	£50,000	£50,000
2026/27 BIK rate	4%	4%
Illustrative taxable benefit	£2,000	£2,000
Potential first-year CA	£50,000	£4,200*
Illustrative CT reduction @25%	£12,500	£1,050*
Cash purchase difference	—	£20,000 cheaper

*Simple 14% full-year illustration.

Now the decision is much less obvious.

The new car wins on immediate tax relief.

The used car wins on purchase price.

And both have the same illustrative BIK because they originally had the same list price.

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Depreciation May Matter More Than Tax

This is probably the most important commercial point in this article.

Imagine a new EV costs:

£50,000

and is worth:

£25,000

three years later.

That’s a:

£25,000 LOSS IN VALUE.

Receiving accelerated Corporation Tax relief doesn’t eliminate that economic loss.

A two or three-year-old EV may allow you to buy after somebody else has absorbed much of the initial depreciation.

So the real comparison is closer to:

PURCHASE PRICE

minus:

EXPECTED RESALE VALUE

plus:

FINANCE AND RUNNING COSTS

plus:

PERSONAL BIK TAX

minus:

COMPANY TAX RELIEF.

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What Happens When the Company Eventually Sells the EV?

Don’t look at the 100% FYA in isolation.

Capital allowance disposal rules apply when the company eventually sells the vehicle.

So claiming £50,000 upfront doesn’t mean the proceeds received when the car is sold are ignored.

A proper whole-life calculation should therefore consider:

PURCHASE + OWNERSHIP + DISPOSAL.

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What About VAT When Buying an Electric Car?

This is one of the most misunderstood EV tax rules.

ELECTRIC DOES NOT MEAN VAT-FREE.

An electric car is still a car for VAT purposes.

VAT on buying a car is generally blocked where the vehicle is available for private use.

Full VAT recovery is normally only possible where the relevant conditions are satisfied — for example, where the car is not available for private use or is acquired for certain qualifying activities.

So if a director buys an electric car through the company and uses it both privately and for business:

DO NOT ASSUME THE COMPANY CAN RECLAIM THE PURCHASE VAT.

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What About VAT on Leasing an EV?

Leasing is different.

Where a VAT-registered business leases a car that has private use, it can normally recover:

50% OF THE VAT ON THE LEASE RENTAL

subject to the normal rules.

VAT on separately charged maintenance can potentially have different treatment.

This is one reason why a proper comparison between:

• cash purchase;
• HP;
• PCP;
• and lease

is worthwhile before signing the agreement.

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What About VAT on Charging an Electric Car?

This is another area where the rules differ from petrol and diesel.

HMRC says VAT incurred by a business on charging an EV can be recovered to the extent it relates to business use where charging takes place:

• at the workplace; or
• at a public charging point,

subject to the normal VAT rules.

Mileage records should be maintained to identify business and private use where necessary.

But home charging by an employee is different.

Where an employee charges an EV at home, HMRC’s published position is that the electricity is supplied to the employee, not the employer.

The employer therefore cannot currently recover VAT on that home electricity under HMRC’s published guidance.

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Does the VAT Fuel Scale Charge Apply to an Electric Car?

This needs particular care.

Businesses with petrol or diesel cars sometimes reclaim VAT on road fuel and account for private use using HMRC’s:

VAT ROAD FUEL SCALE CHARGE.

For 1 May 2026 to 30 April 2027, the lowest CO₂ band — 120g/km or less — has an annual VAT-inclusive scale-charge value of £657.

But:

DON’T SIMPLY APPLY THE £657 SCALE CHARGE TO AN EV BECAUSE IT HAS 0G/KM CO₂.

HMRC’s VAT Notice deals with electricity for charging EVs separately from its rules on road fuel and fuel scale charges.

HMRC says businesses should identify business/private electricity use through mileage records where appropriate.

The practical VAT treatment therefore depends on:

• where the EV is charged;
• who receives the supply of electricity;
• who pays for it;
• whether the business has incurred recoverable VAT;
• and the business/private mileage split.

This is another reason to keep good mileage and charging records.

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Are There Still Grants for EV Chargers?

YES.

The Workplace Charging Scheme currently contributes towards the purchase and installation of EV chargepoints at eligible workplaces.

The scheme can cover up to:

75% OF THE COST

subject to a maximum of:

£500 PER SOCKET

and:

40 SOCKETS

across all sites per applicant.

The current scheme closes on:

31 MARCH 2027.

Eligibility conditions apply, so check them before committing to the installation.

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Can the Company Also Claim Tax Relief on a Charger?

Potentially.

Qualifying expenditure on new and unused electric vehicle chargepoints can currently qualify for:

100% FIRST-YEAR ALLOWANCES.

The current relief is available until:

31 March 2027 – Corporation Tax

5 April 2027 – Income Tax

So a business considering workplace charging should potentially investigate both the grant and the capital allowance position.

The interaction with grant funding needs to be taken into account when determining the qualifying expenditure.

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What About Charging at Home?

The tax position shouldn’t be confused with the VAT position.

For a fully electric company car, HMRC says an employer does not have to report charging provided for the employee’s company EV as a taxable benefit.

For reimbursement of business mileage in a company EV, HMRC now publishes separate advisory electric rates.

From:

1 SEPTEMBER 2026

these are:

Home charging

7P PER MILE

Public charging

15P PER MILE.

These rates relate to company electric cars.

They should not be confused with the 55p AMAP rate for personally owned cars.

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What If I Buy the EV Personally?

This has become significantly more interesting in 2026/27.

If you personally own the vehicle and use it for qualifying business journeys, your company can pay Approved Mileage Allowance Payments of:

First 10,000 business miles

55P PER MILE

Thereafter

25P PER MILE.

The increase from 45p to 55p was backdated to:

6 APRIL 2026.

So if you drive 10,000 qualifying business miles:

10,000 × 55p = £5,500

£5,500

can potentially be reimbursed under the AMAP rules.

That rate applies to electric cars as well as petrol, diesel and hybrid cars.

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£30,000 Used EV Personally vs Company Owned

Suppose you buy a used EV personally for:

£30,000

and drive:

10,000 QUALIFYING BUSINESS MILES.

Your company could potentially reimburse:

£5,500

under the AMAP rules.

There is no company-car BIK because:

IT IS YOUR CAR.

But you personally had to fund the £30,000 purchase.

If the company buys it instead:

• the company provides the £30,000;
• it owns the vehicle;
• it potentially obtains capital allowances;
• it can pay relevant running costs;

but private availability will normally create a company-car BIK.

Neither answer is automatically better.

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Don’t Confuse the EV Mileage Rates

There are now some very different numbers being quoted for electric cars:

Situation	2026/27 rate
Personally owned car – first 10,000 qualifying business miles	55p/mile
Personally owned car – thereafter	25p/mile
Company EV – home charging advisory rate from 1 Sept 2026	7p/mile
Company EV – public charging advisory rate from 1 Sept 2026	15p/mile

These rates do completely different jobs.

55P DOES NOT APPLY TO A COMPANY CAR.

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What About Vehicle Excise Duty?

Electric cars are no longer generally exempt from Vehicle Excise Duty.

There is also the Expensive Car Supplement to consider.

From 1 April 2026, the Expensive Car Supplement threshold for zero-emission cars increased from:

£40,000

to:

MORE THAN £50,000.

So an EV’s list price can affect:

• company-car BIK; and
• potentially VED.

That’s another reason to look beyond the discounted price you actually pay.

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What About Salary Sacrifice?

EVs can also remain particularly attractive through properly structured salary-sacrifice arrangements because low-emission cars benefit from special treatment under the Optional Remuneration Arrangement rules.

But salary sacrifice introduces additional considerations including:

• National Minimum Wage;
• pensionable pay;
• statutory payments;
• early termination charges;
• maternity and other leave;
• employees leaving;
• insurance;
• damage;
• and excess mileage.

For an owner-managed limited company, straightforward company ownership may often be easier to compare first.

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So Which Option Is Best?

A NEW COMPANY EV MAY BE BEST IF:

• your company has sufficient taxable profits;
• the car qualifies for the 100% FYA;
• immediate Corporation Tax relief is valuable;
• an eligible vehicle qualifies for the Electric Car Grant;
• you value a full manufacturer/battery warranty;
• you want the latest battery and charging technology;
• you expect to keep the car for a reasonable period.

A SECOND-HAND COMPANY EV MAY BE BEST IF:

• somebody else has already absorbed substantial depreciation;
• the purchase price is significantly lower;
• preserving company cash is important;
• immediate capital allowance relief is less important;
• the battery condition and warranty are good;
• you are comfortable with the original list price used for BIK.

PERSONAL OWNERSHIP MAY BE BEST IF:

• you can buy a relatively inexpensive used EV personally;
• you drive significant business mileage;
• the 55p AMAP rate is valuable;
• you want to avoid company-car BIK;
• you prefer personal ownership and flexibility.

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The Comparison I Would Make Before Buying

For an owner-managed limited company, don’t just ask:

“Should the company buy an electric car?”

Compare:

OPTION 1

NEW EV BOUGHT BY THE COMPANY

Potential 100% FYA
Low 4% BIK
Potential grant on qualifying lower-priced models
Potentially highest depreciation

OPTION 2

SECOND-HAND EV BOUGHT BY THE COMPANY

Much lower purchase price possible
14% main-rate capital allowances
Same 4% BIK percentage
BIK still based broadly on original list price

OPTION 3

EV BOUGHT PERSONALLY

No company capital allowances
No company-car BIK
Company can potentially pay 55p/mile for first 10,000 qualifying business miles
You personally fund the vehicle

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10 Questions to Ask Before You Order an EV

1. Is it genuinely new and unused?
2. Does it qualify for the 100% EV FYA?
3. Does the particular new model qualify for the Electric Car Grant?
4. What was the original list price for BIK?
5. How much has an equivalent used EV already depreciated?
6. What is the expected resale value in three or four years?
7. How many business miles will I actually drive?
8. Should I buy it personally and claim 55p mileage instead?
9. Should the company buy, HP, PCP or lease it?
10. Where will I charge it and what are the VAT and reimbursement consequences?

Answer those questions before choosing the car.

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Frequently Asked Questions

Does a new electric car get 100% tax relief?

A qualifying new and unused zero-emission car can currently qualify for 100% First-Year Allowances. For Corporation Tax purposes, the current relief runs to 31 March 2027.

Does a second-hand electric car get 100% capital allowances?

No. A second-hand zero-emission car will generally receive main-rate writing-down allowances instead.

What is the capital allowance rate for a used EV in 2026?

The main WDA rate reduced to 14% from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. Hybrid rates can apply to accounting periods spanning the change.

Can I claim AIA on an electric car?

No. Cars are excluded from AIA.

Can I claim Full Expensing on an electric car?

No.

Does the general 40% FYA apply to cars?

No.

The 100% relief for qualifying new EVs comes from the specific zero-emission car FYA.

What is the EV BIK rate for 2026/27?

4%.

Is BIK lower if I buy the EV second-hand?

Not simply because it is second-hand. The calculation is broadly based on the relevant original list price rather than the second-hand price paid.

Can my company reclaim VAT when it buys an electric car?

Usually not where the car is available for private use. EVs don’t receive a special exemption from the normal VAT rules for cars.

Does the VAT fuel scale charge apply to electricity?

Don’t automatically apply the conventional road-fuel scale charge to an EV. HMRC deals with EV charging electricity separately in its VAT guidance, and business/private use and the identity of the recipient of the electricity supply need to be considered.

Can my company recover VAT on home charging?

Under HMRC’s currently published position, where an employee charges an EV at home, the electricity is supplied to the employee rather than the employer, so the employer cannot recover that VAT.

Are EV grants still available?

Yes. Eligible new cars can currently qualify for the Electric Car Grant, with maximum discounts of £3,750 or £1,500, depending on the vehicle’s grant band.

Are charger grants still available?

Yes. The Workplace Charging Scheme currently offers up to 75% of eligible costs, capped at £500 per socket for up to 40 sockets, subject to eligibility.

Can my company pay 55p per mile if I own an EV personally?

Yes, for the first 10,000 qualifying business miles in 2026/27 under the AMAP rules. The rate then falls to 25p.

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New Doesn’t Automatically Mean Better

There is a very compelling tax case for a qualifying new company EV:

100% FIRST-YEAR ALLOWANCE

4% BIK

POTENTIAL EV GRANT

POTENTIAL CHARGEPOINT SUPPORT.

But:

TAX RELIEF DOESN’T MAKE DEPRECIATION DISAPPEAR.

A two or three-year-old EV might cost £15,000 or £20,000 less than its new equivalent.

And personal ownership has become more competitive because the first 10,000 qualifying business miles can now potentially be reimbursed at:

55P PER MILE.

So the right question isn’t:

“Which option gives me the biggest tax deduction?”

It is:

“WHICH OPTION GIVES ME THE LOWEST WHOLE-LIFE AFTER-TAX COST?”

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Bicknell Business Advisers

For owner-managed limited companies, electric cars remain one of the most tax-efficient company-car options available in 2026/27.

But new, second-hand and personally owned EVs can produce very different results.

Before ordering a car, we can compare:

• new vs second-hand;
• company vs personal ownership;
• cash vs HP vs PCP vs lease;
• Corporation Tax;
• capital allowances;
• Benefit in Kind;
• Class 1A NIC;
• VAT;
• grants;
• charging;
• business mileage;
• and expected disposal value.

When you’re spending £30,000, £40,000 or £50,000 on a vehicle, doing the calculation before you buy it can be considerably more useful than working out the tax consequences afterwards.

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More Company Car & Vehicle Tax Guides

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Is It a Van or a Car for Tax?

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About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, landlord tax planning, SDLT, Capital Gains Tax and property company structures throughout the UK.