Used vs New EV

What you need to know

• Legal 100% personal use is fine. HMRC explicitly allows company cars used entirely for personal journeys. You pay BIK tax — that's the deal. Thousands of directors do this. gov.uk source ↺
• Tax New EVs get 100% First Year Allowance. The full purchase price is deducted from taxable profits in year 1 (Capital Allowances Act 2001 s.45D). Extended to 31 March 2027. When you sell, the proceeds become a balancing charge (taxable). HMRC CA23153 ↺
• Tax Used EVs go into the 14% WDA pool. Only new/unused EVs qualify for FYA. Used ones enter the main rate pool at 14%/yr reducing balance. gov.uk source ↺
• Legal Demo & pre-reg cars count as "new and unused". HMRC CA23153 confirms that demonstrator and pre-registered cars qualify for FYA, provided they haven't been registered to an end customer. Low delivery/test-drive mileage is fine — there's no explicit mileage threshold, but HMRC applies a reasonableness test. HMRC CA23153 ↺
• Watch FYA deadline: 31 March 2027. 100% FYA for new zero-emission cars expires 31 March 2027 (corp tax) / 5 April 2027 (income tax). After that, new EVs may revert to the WDA main pool unless extended. gov.uk policy paper ↺
• Tax BIK is on P11D, not purchase price. A £30k list-price car bought as a demo for £21k is still taxed on £30k. At 4% for EVs it's small, but it scales with ownership period. gov.uk source ↺
• Tax Electricity ≠ fuel for HMRC. No fuel benefit charge for EVs. Company can pay for public charging with zero additional BIK. This is the key EV advantage. gov.uk source ↺
• Tax Charger install: 100% FYA, no BIK. Extended to March 2027. Company pays, you get a free charger, no personal tax liability. gov.uk source ↺
• Admin BIK must be payrolled from April 2026. HMRC is ending P11D reporting for most benefits. Set car up as fixed asset, payroll the BIK monthly. FreeAgent supports this. gov.uk source ↺
• Watch Insurance needs sorting. The company must be the policyholder for a company-owned car — standard personal comparison sites won't work. Call insurers directly and tell them it's a company vehicle.
• Tax Extraction tax isn't a real HMRC charge. It's the hidden cost of funding a personal purchase from company profits. Money travels: profit → corporation tax (19%) → dividend → dividend tax (~10.75%) → your pocket. By the time £1 of profit becomes personal cash, roughly 28p is lost. So a £12k car effectively costs the company ~£15k to fund personally. Company car scenarios avoid this entirely — the company buys direct.
• Tax "Cost of deferred CT relief" explained. When the company buys a car, it gets corporation tax relief on the cost. With FYA (new EV), 100% relief arrives in year 1 — your CT bill drops immediately. With WDA (used EV), relief trickles in at 14%/yr. The money your company pays in extra CT while waiting for relief could have been earning interest or working elsewhere. This line item quantifies that opportunity cost at your chosen rate.
• Watch eVED (pay-per-mile) starts April 2028. Electric vehicles will pay 3p/mile on top of standard VED. At 5,000 miles/yr that's £150/yr extra. This calculator models eVED for any ownership years that fall from 2028/29 onwards. gov.uk consultation ↺