Last updated: 14 October 2026
Can a company claim the 100% first-year allowance on an electric car?
Yes. A limited company that buys a new, unused, zero-emission car, such as a fully electric car, can claim a 100% first-year allowance. That means the full cost is deducted from profits in the year of purchase. Second-hand electric cars don’t qualify, and they go into the main pool, which gets a writing-down allowance of 14% a year from April 2026 (18% before). Private use by a director doesn’t reduce the company’s claim, but it does create a benefit in kind.
The capital allowance rules for cars
| Car | Allowance |
| New and unused, 0g/km CO2 (fully electric) | 100% first-year allowance |
| Second-hand electric | Main pool, 14% a year (18% before April 2026) |
| New or second-hand, 1 to 50g/km CO2 | Main pool, 14% a year (18% before April 2026) |
| Over 50g/km CO2 | 6% special rate pool |
Cars never qualify for the Annual Investment Allowance. Finance Act 2026 extended the 100% first-year allowance for zero-emission cars to expenditure incurred by 31 March 2027 for companies (5 April 2027 for income tax). Buy after that date and you should check whether it has been extended again.
Example
A company buys a new electric car for £45,000 and the director uses it privately.
- First-year allowance: £45,000, deducted from profits
- Corporation tax saving at 25%: £11,250, or £8,550 at 19%
- The company also reclaims VAT only if the car is used exclusively for business, which is rare. If there is any private use, no VAT is reclaimed on the purchase
Benefit in kind for the director
Electric company cars have low benefit-in-kind rates. The rate is 4% of the list price in 2026/27, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. On a £45,000 list price, the taxable benefit is £1,800. A higher-rate taxpayer pays £720 a year in tax, and the company pays Class 1A NIC at 15% (£270). Charging at work is tax-free, and the company can pay home charging costs at HMRC’s advisory electricity rate.
Leasing instead of buying
If the company leases an electric car instead, it claims the lease payments as an expense. There is no 15% disallowance, because that only applies to cars over 50g/km, and the company can reclaim 50% of the VAT on lease rentals if there is private use.
Selling the car later
If the company sells the car, the sale price is a balancing charge, and it is added back to profits for tax. Plan disposals around your year-end.
Electric vans
Electric vans qualify for 100% first-year allowances or the Annual Investment Allowance, and van benefits are taxed differently. Zero-emission vans have no taxable benefit.
Frequently asked questions
Does a sole trader get the 100% allowance too?
Yes. Sole traders also get the 100% first-year allowance for a new zero-emission car, but it is reduced by the private-use percentage.
Is a plug-in hybrid eligible?
No. Hybrids emit CO2, so they go into the main or special rate pool.
Can I claim the home charger?
Yes. A company can claim the charge point, and when it is provided for an employee’s home use, it is generally tax-free for the employee.
Do I need a full business-use log?
Keep records of mileage. They support VAT and benefit claims.
Related: VAT on employee mileage and corporation tax rates.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with company cars and capital allowances. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
