The Autumn Budget was delivered on 28 October 2026, and the fuel duty freeze took most of the headlines. For businesses that run vehicles, though, the detail matters far more: how company car tax on electric cars is changing, when the new pay per mile charge arrives, and what happens to the tax relief on buying a car outright once the current allowance ends in spring 2027.
This guide explains each measure in plain English, shows what it means for a typical £45,000 electric company car, and sets out how it affects the choice between leasing and buying. Where we are giving our own view rather than a confirmed fact, we say so. Figures are correct at 31 October 2026, and some measures still have to be legislated in the Finance Bill.
The short version
Electric is still the right company car. Benefit in Kind (BiK) on electric cars is 4% in 2026/27, rising each year to 9% in 2029/30 and 10% in 2030/31. That is still far below the bands for petrol and diesel cars.
A pay per mile charge is coming. Electric vehicle excise duty (eVED) starts in April 2028 at 3p a mile for fully electric cars and 1.5p a mile for plug in hybrids.
The 100% first year allowance is not being extended. It ends on 31 March 2027 for companies, and 5 April 2027 for income tax payers. After that, a car you buy is written down at 12% a year.
Leasing becomes relatively more attractive after April 2027. Lease rentals are generally deductible as they are paid, while relief on a purchased car arrives much more slowly.
Own car mileage rates improve. The 55p rate for the first 10,000 business miles is now permanent, and miles above 10,000 rise from 25p to 35p from 6 April 2027.
Company car tax: electric still wins, but the path is steeper
If you or your employees have a company car for private use, you pay tax on the benefit. The taxable benefit is the car's list price multiplied by the BiK percentage for that tax year, and you then pay income tax on that figure at your own rate. For electric cars the percentage is the lowest of any fuel type, which is why electric company cars have become so popular.
The Budget confirmed the path for electric cars and added one new year at the end of it. Here is what that looks like for a £45,000 electric car driven by a 40% taxpayer:
2026/27 at 4%: a taxable benefit of £1,800, costing the driver £720 in income tax.
2027/28 at 5%: a benefit of £2,250, costing £900.
2028/29 at 7%: a benefit of £3,150, costing £1,260.
2029/30 at 9%: a benefit of £4,050, costing £1,620.
2030/31 at 10%: a benefit of £4,500, costing £1,800.
Employers pay too. Class 1A National Insurance is charged at 15% on the taxable benefit, so the same car costs the business £270 in 2026/27 and £675 by 2030/31.
The Budget also confirmed that every company car tax band rises by one percentage point in 2030/31, so petrol, diesel and hybrid cars move up as well. The gap between electric and everything else remains very wide. Anyone telling you the electric advantage has gone is making a costly mistake.
What has changed is certainty. Industry reaction to the Budget was disappointment at the lack of clarity beyond 2030, and BiK is worked out each tax year, not fixed when you sign. If you are taking a three or four year lease today, plan for the tax cost to rise across the contract rather than stay flat at 4%.
If you are weighing up the detail for yourself or your directors, our Director's Guide to Company Car Leasing for 2026/27 walks through the tax, and our company car leasing and electric vehicle leasing pages explain how we source the right car. For the wider case for going electric, read why electric cars suit businesses of all sizes.
eVED: the running cost many quotes still leave out
From April 2028, fully electric cars will pay 3p for every mile driven, and plug in hybrids 1.5p. The charge sits on top of the usual vehicle excise duty. On a car covering 10,000 miles a year that is about £300, and on 20,000 miles about £600.
This matters now, not in 2028, because of how long business leases run. A 36 month lease started today ends in late 2029, so roughly the last 19 months of the contract fall after eVED begins. On 10,000 miles a year that is about £475 of extra cost, and about £950 on 20,000 miles. On a 48 month lease started today, about 31 months of the contract are affected, which is roughly £775 at 10,000 miles a year and £1,550 at 20,000 miles.
Any whole life cost comparison for an electric car that ignores eVED therefore understates the true cost of running it. The industry is still working out how the charge will be collected and passed through in lease agreements, so it is worth asking your broker how it will be handled in the contract you are being offered.
A simple check before you sign: ask whether the quote or running cost comparison includes an allowance for eVED from April 2028. If it does not, add about £150 for every 5,000 miles you drive each year, for every year of the contract that falls after that date. Our electric vehicle guide covers charging, range and running costs in more detail.
Capital allowances: the 100% allowance ends in spring 2027
Capital allowances are how tax relief is given when a business buys an asset such as a car. They are the reason the buy versus lease question is more nuanced than it first appears, so it is worth taking a moment to understand them.
Today, a new, unused, fully electric car bought by a business qualifies for a 100% first year allowance. That means the full cost can be deducted from taxable profits in the year of purchase. The relief was extended by one year at the 2025 Budget and is due to end on 31 March 2027 for corporation tax and 5 April 2027 for income tax.
The Autumn Budget 2026 did not extend it. There was no announcement on zero emission cars at all, so the current law stands. The Budget did make two other changes to capital allowances, and neither helps car buyers:
The main rate writing down allowance falls from 14% to 12% from 1 April 2027 for corporation tax, and 6 April 2027 for income tax.
The main rate first year allowance rises from 40% to 50% for spending from 1 January 2027, but cars are specifically excluded.
In practice, a company buying an electric car after the 100% allowance ends will write it down at 12% a year on a reducing balance. Here is what that means for a £45,000 electric car where the VAT cannot be recovered, so the full £45,000 qualifies, and the company pays 25% corporation tax:
Bought before 1 April 2027: £45,000 is deducted in year one, saving £11,250 in corporation tax.
Bought after 1 April 2027: £5,400 is deducted in year one, saving £1,350 in corporation tax.
The honest caveat is that this is mostly about timing. Over the whole life of the car, the total relief broadly reflects what the car cost you less what you sell it for, whichever route you take. A 100% allowance brings that relief forward, while a 12% allowance spreads it out. For a business that is watching cash flow, or one without the profits to use a large deduction in a single year, slower relief is a genuine cost.
One practical warning: the date the expenditure is treated as incurred is what counts, not the date the car is registered or delivered. If you are thinking of buying before the deadline, ask your accountant how a car on order would be treated. Our limited company leasing guide explains the tax and VAT treatment in more depth.
Leasing versus buying after the Budget
It would be too simple to say the Budget makes leasing the clear winner. Here is a fair view of both sides.
The case for buying before 1 April 2027
If your company is profitable, has the cash or finance available, and plans to keep the car for several years, buying a new electric car before the allowance ends can give a very large deduction in a single year. That is a real advantage, and it is one that leasing cannot match, because a business that leases does not own the car and so cannot claim capital allowances on it. If this describes you, speak to your accountant now rather than waiting.
The case for leasing
Leasing works differently. With Business Contract Hire, you pay a fixed monthly rental, and those rentals are generally deductible as a business expense as they are paid. For most business cars used privately, 50% of the VAT on the rental can be reclaimed. When you buy a car that has any private use, the VAT on the purchase price is typically not recoverable at all.
Leasing also keeps your cash and credit lines free for the parts of the business that generate revenue, and it removes the risk of the car being worth less than expected when you hand it back. With electric cars, where used values are still hard to predict three or four years ahead, that matters. After April 2027 it also means your tax relief arrives in step with the payments, instead of trickling in at 12% a year.
Leasing companies buy their cars under the same allowance rules, and rental pricing is set by funders, so we will be watching how rates move in 2027 rather than guessing. If you want to see how the two routes compare for your own business, ask us to run a like for like comparison. Our comparison of Business Contract Hire and finance lease and our business car finance page show the other options side by side.
Salary sacrifice after the Budget
Salary sacrifice car schemes use the same BiK rates as company cars, so the 4% rate for 2026/27 and the climb to 10% in 2030/31 apply to employees on a scheme too. Employees still benefit from paying income tax and National Insurance on a much smaller figure than their full gross salary, and employers save National Insurance on the sacrificed amount.
The Budget documents left open the potential for changes to electric car salary sacrifice, with no detail given. Nothing has been announced, and we would not change a scheme in response to a possibility. But if you are planning to launch or renew a scheme, it is worth building in flexibility and keeping an eye on the Finance Bill.
To see how it works, visit our salary sacrifice page, try the salary sacrifice calculator, or read our guides on salary sacrifice cars for employers and the best salary sacrifice cars for 2026. HR teams may also find our HR benefits page useful.
Using your own car: the mileage rates are better
The Budget made the 55p a mile rate for the first 10,000 business miles permanent, and raised the rate above 10,000 miles from 25p to 35p from 6 April 2027. Someone driving 15,000 business miles in their own car would be able to claim £7,250 a year from April 2027, up from £6,750.
For a director doing low business mileage, claiming mileage in a personal car now looks more attractive than before, and some will compare it with a company electric car. It is a fair comparison, but run it properly. A mileage claim is meant to cover your own motoring costs, which means you carry the depreciation, insurance, servicing and the risk of the car losing value. A leased company car packages those costs into one monthly figure. Which is better depends on how many business miles you really drive and how much private use there is.
Our article on company car versus car allowance sets out the differences for employers.
Fuel and charging costs
The planned fuel duty rise was cancelled, and the freeze was extended, which is welcome. But the relief is short term, and fleets that run petrol and diesel vehicles should treat it as a pause rather than a lasting saving. On the electric side, VAT on public and workplace charging stays at 20%, so drivers without access to home charging will still pay a premium for public charging. If charging is a worry, our electric vehicle guide explains the options.
This article focuses on cars. If you run vans, or a mix of cars and vans, see our pages on business van leasing and electric van leasing, our guide to electric vans for business in 2026, and our fleet management service for help with the whole picture. Our guide to fleet maintenance for small business covers the costs people often forget to budget for.
What we are watching in 2027
Used electric car values. In our view, eVED may put downward pressure on used electric car values over time. If funders allow for that in their pricing, rentals on electric cars could move during 2027 even though company car tax stays low. This is a risk to monitor, not something the Budget has confirmed.
Salary sacrifice. Any detail on potential changes to electric car salary sacrifice will matter to employers and employees alike.
The Finance Bill. Several of these measures are not yet law. The detail, including exact dates, can change.
Company car tax beyond 2030. Many in the industry want clarity on what replaces the current system as nearly all company cars become electric.
Six things to do now
Refresh any quote or comparison prepared before 28 October. Anything using the old 14% writing down allowance, or leaving out eVED, is out of date.
Decide whether buying before 1 April 2027 makes sense. Speak to your accountant about your profits, cash and the timing of the expenditure.
Add eVED to your running costs. Allow roughly 3p a mile from April 2028 for fully electric cars.
Plan for BiK to rise. Budget for the tax cost at the rate in each year of the contract, not just the first.
Review mileage claims and car policies. The new rates may change the best option for low mileage directors and staff.
Talk to a broker early. Knowing your options well before the April 2027 dates gives you time to decide, and time to take delivery if you choose to buy.
Frequently asked questions
Is an electric company car still worth it after the Autumn Budget 2026?
Yes, on company car tax alone. Electric cars pay 4% BiK in 2026/27, rising each year to 10% in 2030/31, which is still far below the bands for petrol and diesel cars. What has gone is the certainty that the gap stays this wide.
When does eVED start and how much will it cost?
eVED starts in April 2028 at 3p a mile for fully electric cars and 1.5p a mile for plug in hybrids. A car covering 10,000 miles a year would pay about £300 a year, and 20,000 miles about £600.
Has the 100% first year allowance for electric cars been extended?
No extension was announced. The allowance for new zero emission cars is due to end on 31 March 2027 for corporation tax and 5 April 2027 for income tax. Cars bought after that fall into the main pool, where the writing down allowance is falling from 14% to 12%.
Does eVED apply to leased electric cars?
The charge applies to electric cars on the road, whether they are leased or owned. How it is collected and passed through in lease agreements is still being worked out across the industry, so ask your broker how it will be treated in your contract.
Should my business lease or buy an electric car after the Budget?
It depends on your profits, VAT position and cash flow. Buying before 1 April 2027 still carries the 100% first year allowance. After that, relief on a purchased car arrives much more slowly, while lease rentals are generally deductible as they are paid. Ask your accountant to run the numbers for your company, and speak to us about the lease side.
Talk to VCEA about your next vehicle
We are an independent business vehicle leasing broker with more than 20 years of experience, and we can show you a like for like comparison of leasing options for your business, with company car tax and eVED included in the whole life cost. We are a credit broker and not a tax adviser, so we will always suggest you confirm the tax treatment with your accountant.
Get a business lease quote or call us on 01733 836563. You can also explore business car leasing, read how business vehicle leasing works with a vehicle broker, or check our FAQ.
Popular electric models our clients lease include the BMW iX3, Tesla Model Y, Kia EV3 and Volkswagen ID.7. Based in Peterborough, we support businesses across Peterborough, Cambridge, Norwich, East Anglia and the rest of the UK.
Sources
Fleet News, Budget 2026: clarity on company car tax rates welcomed by fleets
Fleet News, Budget 2026: fleet and leasing sector reacts to the Chancellor's tax measures
Kreston Reeves, Capital allowance changes after Autumn Budget 2026
Deloitte TaxScape, Business mileage: higher rate above 10,000 miles
GOV.UK, The introduction of Electric Vehicle Excise Duty (eVED): consultation response
GOV.UK, Class 1A National Insurance contributions on benefits in kind, 2026
This article is general information only and is not tax, legal or financial advice. Tax rates, allowances and start dates may change, and some Budget measures are subject to legislation. Confirm your own position with a qualified accountant before making a decision. Vehicle Consulting East Anglia is a trading name of C&N Consulting Services Ltd, authorised and regulated by the Financial Conduct Authority (FRN 1029606). We are a credit broker and not a lender, and a commission may be payable to us by our lenders.
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Figures correct at: 31 October 2026. Review when the Finance Bill is published.
