Can You Get Tax Credit for Leasing an Electric Car? 

Electric cars are becoming increasingly popular in the UK, and with good reason. They’re cleaner, cheaper to run, and come with plenty of tax benefits - especially for businesses and company car drivers. But what about when you lease an electric car rather than buy one outright? 

Can you still get a tax credit or tax relief on your lease payments? Let’s take a closer look at how the UK’s electric vehicle (EV) tax system works, and how it applies to both personal and business leasing. 

Understanding “Tax Credit” for Electric Cars 

In the UK, we don’t have a traditional electric car tax credit like in some other countries (for example, the US). Instead, drivers can benefit from a mix of tax incentives, grants, and reliefs that help reduce the cost of owning or leasing an electric vehicle. 

These include: 

• Lower Benefit-in-Kind (BIK) tax rates for company cars 

• Corporation tax relief for businesses 

• VAT savings and partial recovery on business leases 

• Exemptions from certain charges, like the London Congestion Charge and Vehicle Excise Duty (road tax) 

So, while you won’t receive a direct “tax credit” payment for leasing an electric car, there are still several ways to save money through the tax system. 

Tax Benefits for Leasing an Electric Car  

Let’s break down the main ways personal and business drivers can save on tax when leasing an electric vehicle in the UK. 

1. Benefit-in-Kind (BIK) Tax for Company Car Drivers 

If you lease an electric car through your employer, the Benefit-in-Kind (BIK) system determines how much tax you pay for using a company vehicle. 

BIK is essentially a tax on the value of the benefit - in this case, your car lease. The lower the vehicle’s CO₂ emissions, the lower the BIK rate. 

As of 2024/2025, the BIK rate for fully electric cars is just 2% of the car’s list price, this is significantly lower than petrol or diesel vehicles, which can exceed 25%. 

That means employees driving leased EVs through work can save thousands in tax each year. 

Upcoming change: The UK government has confirmed that BIK rates will gradually increase by 1% per year from 2025 - 2028. Even then, electric cars will remain far cheaper to tax than combustion models. 

So, if your company leases your EV, you’ll still benefit from one of the lowest tax rates available, and potentially save on National Insurance contributions too. 

2. Corporation Tax Relief for Businesses 

If your business leases an electric vehicle, you can usually deduct the lease payments as a business expense, reducing your corporation tax liability. 

• Fully electric cars (0g/km CO₂) qualify for 100% first-year allowances if purchased outright. But, even on a lease, businesses can claim monthly deductions. 

• Lease rentals are generally fully deductible, provided the car is used for business purposes. 

If the lease includes both business and personal use, you’ll need to proportion costs accordingly. 

This makes electric car leasing particularly attractive for limited companies looking to save on tax while supporting sustainability goals. 

3. VAT Savings for Business Leases 

VAT (Value Added Tax) treatment depends on how the car is used: 

• If a leased car is used exclusively for business, a company can usually reclaim 100% of the VAT on the lease payments. 

• For mixed personal and business use, businesses can typically reclaim 50% of the VAT. 

VAT can also be recovered in full on maintenance packages that come with the lease, as those are classed as services rather than goods. 

4. Salary Sacrifice Schemes 

Another tax-efficient way to lease an electric car is through a salary sacrifice scheme. 

This is where employees give up part of their gross salary in exchange for a leased EV. Because the lease payments are taken before tax and National Insurance, you can save up to 30-40% compared to leasing privately. 

When combined with the low 2% BIK rate, this is currently one of the most cost-effective ways to drive an electric vehicle. 

Tax Perks for Personal Leasing

While most tax benefits apply to businesses and company cars, personal lessees still enjoy indirect financial perks that make electric car leasing more affordable: 

• No road tax (Vehicle Excise Duty) for zero-emission cars until 2025. From April 2025, EVs will start paying a standard rate (currently £190 per year). 

• Exemption from the London Congestion Charge (until December 2025). 

• Cheaper running costs - electricity is far cheaper per mile than petrol or diesel. 
  Government grants still available for installing a home EV charger (under the EV ChargePoint Grant scheme). 

Even though personal drivers don’t receive a direct tax credit, the combined savings on running costs and road charges can still make leasing an EV a smart choice. 

Key Tax Changes Coming for 2026 and Beyond 

The UK government has confirmed several upcoming changes that affect electric vehicle taxation: 

1. Road tax (VED): From April 2025, new and existing EVs will pay standard road tax rates. 

2. Benefit-in-Kind rates: Gradual increases from 2% to 5% between 2025 - 2028. 

3. Plug-in Car Grant (PiCG): The grant for new EVs ended in 2022 but grants for vans and charging points remain. 

4. Salary sacrifice schemes: Still highly tax-efficient for EVs, especially with rising BIK rates remaining much lower than petrol or diesel. 

These changes reflect the government’s plan to phase out pure incentives as EVs become mainstream, but leasing remains one of the most cost-effective ways to drive electric. 

Frequently Asked Questions About the Electric Car Tax Credits

Leasing Still Wins for Tax-Smart EV Driving

While the UK doesn’t offer a straightforward “tax credit” for leasing electric cars, there are still plenty of financial advantages for both personal and business users. 

From low Benefit-in-Kind rates and corporation tax relief to VAT recovery and zero-emission incentives, leasing an EV remains one of the smartest, most tax-efficient ways to get behind the wheel of an electric car. 

Whether you’re a company director looking to reduce your tax bill or a private driver aiming to cut costs, an electric lease from Motorlet can help you save money while driving greener.