How capital allowances for zero-emission vehicles work
First-Year Allowance (FYA) is a tax relief that lets businesses deduct the full cost of certain purchases from their profits in the same year. Usually, when you buy something like a company car, you’d spread the cost over a few years. But FYA speeds things up, meaning you get the taxable benefit straight away. When it comes to electric vehicles (EVs), the savings can be substantial.
Claiming 100% FYA on electric car purchase 2026/27
Here’s where things get interesting. If your business buys a new, unused, zero-emission car, you can currently claim 100% First-Year Allowance on it.
That means:
You can deduct the entire cost of the vehicle from your taxable profits.
You could reduce your electric car corporation tax relief significantly in the same year.
It’s a powerful incentive, and one designed to accelerate the shift to zero-emission transport.
But it won’t be around forever:
Available until 31 March 2027
for companies.
Available until 5 April 2027
for unincorporated businesses.
So if you’re planning the switch, timing is key.
What vehicles qualify for business EV tax relief?
Not all vehicles make the cut, so it’s worth knowing the rules. To qualify for FYA, the vehicle must be:
Brand new (not used)
Zero-emission (fully electric car)
This means:
No hybrids
No second-hand EVs
If you do opt for a used EV, you can still claim tax relief, but it’ll be through standard "writing down allowances", which are slower (and less generous).
EV charging station tax credit
It’s not just the cars themselves. If your business is investing in EV charging infrastructure, there’s good news:
You can claim 100% First-Year Allowance on chargepoint purchase and installation
Additionally, as of April 2026, the Workplace Charging Scheme grant has increased to £500 per socket
So whether you’re installing chargers at your office, depot or across multiple sites, you can still benefit from that same upfront tax relief.
EV benefit-in-kind rates 2024/25 for drivers
If you offer company cars, EVs come with another major perk: low Benefit-in-Kind (BIK) tax rates.
Right now:
2025/26: 3%
2026/27: 4%
2027/28: 5%
That’s significantly lower than petrol and diesel cars, meaning:
Employees pay less tax.
Employers pay less in National Insurance.
It’s one of the reasons EVs are becoming such an attractive option for company car drivers.
The tax benefits of electric company cars for employers
Between 100% First-Year Allowances, low BIK rates, and the ongoing shift toward cleaner transport, EVs are quickly becoming a practical business decision, not just an environmental one.
In real terms, this means:
Immediate tax savings
Lower long-term fleet electrification TCO (Total Cost of Ownership)
A future-proofed fleet
And with the FYA window currently open, businesses have a clear opportunity to act.
The bottom line
Switching to electric isn’t just about doing the right thing; it’s about making a smart investment. With First-Year Allowances for EVs, you can reduce your tax bill, support your team with lower BIK rates and take a meaningful step toward cleaner transport, all at the same time.
Supporting fleets and business drivers
If you're a fleet driver with an Allstar card, using char.gy is simple.
Download the char.gy app to find your nearest charge point, start a charging session, and pay using your Allstar card. Your charging costs are captured alongside your other fleet expenses — no separate receipts, no reimbursement faff.
For fleet managers, it means one less barrier standing between your drivers and the switch to electric. Your team can charge near home, reduce their reliance on expensive rapid charging, and keep costs predictable, all within the systems you already use.
Explore the char.gy network and get started today.