EV business lease: how leasing an electric car through your limited company works

An EV business lease (usually a Business Contract Hire) is a way for a limited company to rent an electric car for a fixed term and hand it back. For 2026/27, the company can deduct the rentals from profits and reclaim half the VAT on them. The driver pays benefit-in-kind on 4% of the list price.

We explore the ins and outs for EV business leases, including how they work and the tax considerations.

Per £100 of rental (before VAT), a VAT-registered company paying 25% corporation tax ends up about £85 out of pocket. Buying a £40,000 electric car by 31 March 2027 gets £10,000 of tax relief in year one instead, but the sale price is taxed later. Our worked comparison below shows where the break-even sits.

Tax rules on this page are sourced from gov.uk and HMRC guidance, checked on 12 October 2026. Rates change each April and at each Budget, so check them again before you sign.

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What is an EV business lease?

An EV business lease is typically a Business Contract Hire (BCH) agreement: a leasing company buys the electric car and your limited company rents it for a fixed term, often two to four years. At the end, you hand it back, so the company never carries the risk of what the vehicle is worth.

You agree the term, an annual mileage limit and an initial rental up front, then pay a fixed monthly rental. Maintenance can be included as an optional package. It works the same way as business car leasing more generally – the tax treatment is what makes an electric car different.

BCH is a rental, not a route to ownership. If you want to own the car at the end, the closer option is business contract purchase, where you pay towards the car and can make a final balloon payment to keep it.

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How is an EV lease taxed for a limited company?

For a fully electric car, a company can deduct the full rental from its profits for corporation tax and, if it's VAT-registered, reclaim 50% of the VAT on the rental. The driver pays benefit-in-kind (BiK) tax on the car, and the company pays Class 1A National Insurance on the same value.

Take a look at leasing an EV vs buying one outright side-by-side below:

Corporation tax is 25% on profits over £250,000 and 19% on profits of £50,000 or less, with marginal relief in between. The rate your company pays decides how much each deduction is worth.

So, are electric cars 100% tax deductible? The rentals on a leased electric car are, as a business expense. A bought one gets the full cost written off in year one through the first-year allowance. The deadline for that is 31 March 2027.

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Benefit-in-kind on an electric company car

BiK on a fully electric company car is 4% of its list price in 2026/27 and 5% in 2027/28, then 7% and 9%. On a £40,000 car that's a £1,600 taxable benefit in 2026/27: £320 of tax a year for a basic-rate taxpayer and £640 for a higher-rate one.

See the table below:

Sources: gov.uk, rates for 2025/26 to 2027/28 and 2028/29 to 2029/30. Income tax rates are for England, Wales and Northern Ireland Scottish bands differ.

The rate rises every April, so a lease you sign now will cost the driver more in its later years. Electricity isn't treated as fuel, so there's no fuel benefit charge on top (HMRC EIM23900).

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Road tax and the expensive car supplement

Electric cars pay road tax: £10 in the first year, then the £200 standard rate. If an electric car's list price is more than £50,000, there's an extra £440 a year for five years from year two.

That £50,000 threshold for electric cars applies from 1 April 2026 – it's £40,000 for petrol and diesel cars. On a lease, road tax is usually in the rental, but a car just over the threshold can push the rental up.

The government also plans a pay-per-mile charge on electric cars from April 2028, alongside road tax. It isn't law yet (gov.uk consultation), but a four-year lease signed now would run into it.

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Leasing an electric van instead

A van is taxed more lightly than a car. VAT on van rentals isn't caught by the 50% block that applies to cars, and a zero-emission van carries no van benefit charge for the driver.

The 50% VAT block applies to cars only, so a VAT-registered company can reclaim VAT on van rentals under the normal rules. The van benefit charge for zero-emission vans has been nil since April 2021.

Learn more about the contracts themselves in our guide to leasing a van for the business.

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Is it cheaper to lease or buy an electric car through the company?

It depends on what you'd pay in rentals and what the car would sell for later. Buying a new electric car by 31 March 2027 gets a 100% first-year allowance, but the sale price is taxed when you sell. Leasing spreads the cost and leaves the resale risk with the leasing company.

Here's a worked comparison for a £40,000 electric car kept for 48 months, using only the tax rules above, with our assumptions:

• The company is VAT-registered and pays corporation tax at 25%.
• It buys the car new, with cash, by 31 March 2027 – so there's no VAT back on the price and no interest cost.
• The sale price comes back into tax when you sell (as a balancing charge, or by reducing your capital allowances pool), so we tax it at 25%.
• We leave out maintenance, insurance and timing – relief on a purchase lands in year one, while lease relief is spread over the term.
• The 50% of rental VAT you can't reclaim isn't counted as a deduction here. Check its treatment with your accountant.

Leasing: for every £100 of rental before VAT, the company pays £120. It reclaims £10 of VAT and saves £25 in corporation tax, so it's about £85 out of pocket.

Buying: the £40,000 car gets £10,000 of tax relief in year one, so it costs £30,000 after tax. When you sell, the company keeps 75% of the sale price after tax.

Here's an example breakdown:

The sale prices are illustrative, not forecasts, as nobody can be sure what a four-year-old electric car will be worth. To use the table, add up a quote's initial rental and monthly rentals (before VAT) and compare the total with the break-even figure for the resale value you think is realistic.

BiK is the same either way, so it doesn't change the answer. If your company would look to borrow money to buy the car, add the interest to the cost of buying. You might pay for it through hire purchase or a loan. Get more info on buying it through the company in our company car purchase guide.

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When leasing is the better choice for EVs

Leasing tends to suit a company that wants a fixed monthly cost, doesn't want to carry the car's resale value, or doesn't have the profits to use a first-year allowance. Buying outright is more for a profitable company that plans to keep the car for longer.

EV leasing is likely to work better for you if:

• You want a fixed cost you can budget for, with no surprise at resale.
• Your profits are too low to make full use of a first-year allowance before 31 March 2027.
• You'd rather swap cars every few years as range and charging improve.
• You'd want to keep cash in the business rather than tie it up in a car.

Buying the EV can be the better option if:

• The company is profitable and can use the 100% first-year allowance in year one.
• You'll keep the car well beyond a typical lease term.
• Your mileage is high or hard to predict, so excess mileage charges would bite.

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Charging EVs: grants and tax

Workplace chargepoints can get up to £500 a socket from the Workplace Charging Scheme until 31 March 2027, and chargepoint equipment the company buys qualifies for a 100% first-year allowance. Charging a company EV at work isn't a taxable benefit for the driver.

Here's a quick summary:

The higher £500 rates apply to installations completed from 1 April 2026. People who own a house are no longer covered by the home grant.

On tax, HMRC doesn't treat electricity as fuel. There's no taxable benefit when a company car charges at work. If the company reimburses the driver for charging their company car at home or on a public charger, that's exempt too (HMRC EIM23900). There were 121,171 public chargers in the UK on 1 July 2026 (DfT, gov.uk).

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How to compare EV lease quotes and what to check before you sign an agreement

Compare the total cost over the whole term, before VAT, for the same length and mileage, not the monthly figure. Then check what happens at the end: the mileage limit, the condition the car has to come back in and the cost of ending the lease early.

When you line up quotes, check for the following:

• Total cost: initial rental plus every monthly rental, all before VAT. A low monthly figure can mean a bigger initial rental.
• Same terms: the same length, annual mileage and initial rental on every quote.
• What's included: maintenance, tyres and road tax. Ask for maintenance to be billed as a separate line. That part gets 100% of its VAT back.
• Mileage: the excess mileage charge per mile if you go over.
• Condition on return: the fair wear and tear standard the leasing company uses, and how it charges for damage.
• Ending early: the termination charge. It's treated as extra rental, so only 50% of its VAT can be reclaimed (VAT Notice 700/64).
• The broker: check it's authorised on the FCA register.
• Credit checks and guarantees: the leasing company will check the company and may also check its directors. Some ask a director to sign a personal guarantee, so make sure you read the terms and understand what you'd be liable for.

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Salary sacrifice: an option for your staff

Salary sacrifice is a scheme your company runs for its employees. In this case, they give up some salary and get an electric car in return. Because cars at 75g/km or less are outside the optional remuneration rules, staff pay normal BiK rather than tax on the salary they give up (gov.uk).

This isn't a government scheme. Your company sets it up, usually with a provider, and runs it through payroll. It suits staff paid a salary through PAYE. If you pay yourself mostly through dividends, there may be little salary to sacrifice, so a company car on a business lease may be simpler. Check with your accountant for advice.

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Funding the costs around an EV lease

iwoca doesn't offer leasing. If a lease is right for you but the initial rental, a chargepoint install or buying outright would strain cash flow, an iwoca Flexi-Loan can cover it. Borrowing adds interest, though, so compare it with a lease that has a smaller initial rental first.

Here's how a Flexi-Loan works for these costs:

• You can borrow from £1,000 to £1 million, over terms of up to five years.
• It's a business loan with flexible repayment options: you draw what you need up to your limit and pay interest only on what you draw.
• You can repay early at any time, with no penalty.
• At least one director gives a personal guarantee. Here's how a personal guarantee works.
• You get a decision within 24 hours.

A chargepoint install is a good example: the Workplace Charging Scheme covers up to £500 a socket, and a loan can cover the rest. Buying the car outright with flexible business finance such as a Flexi-Loan can make sense if the worked comparison above favours buying. Just add the interest to the cost of buying when considering the options.

A Flexi-Loan is for UK limited companies. So far, we've lent £5bn+ to 100,000+ businesses.

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EV business lease FAQs

Are electric cars 100% tax deductible for a limited company?

Lease rentals on a fully electric car are deductible in full for corporation tax. A new electric car the company buys by 31 March 2027 gets a 100% first-year allowance instead.

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Is it worth leasing an electric car through my business?

It can be, especially if the car will have private use: BiK on an electric car is 4% of its list price in 2026/27. Run the lease vs buy numbers above before you decide.

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Do I need a home chargepoint to lease an electric car?

A home chargepoint isn't usually a condition of the lease itself, but think about where the car will charge before you sign. Check the grants above before you pay for an install.

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What happens if we end an EV lease early?

You'll usually pay a termination charge set in the contract, and you can only reclaim 50% of its VAT. Check the early-termination terms before you sign.