EV company cars lose 100% first-year tax relief from April 2027: what buying before 31 March saves

Businesses buying new electric company cars have until 31 March 2027 to write off the full cost against Corporation Tax in one go. After that, the 100% first-year allowance ends and new EVs get a 12% writing down allowance instead, so the immediate saving on a car bought by a company paying the 25% main rate falls from 25% of the price to 3%. Sole traders and partnerships have until 5 April 2027, according to HMRC.

For a company director or fleet manager, that makes the timing of the next car order worth thousands of pounds in cash flow. The total relief is not lost, but it is spread over many years. Company car tax and employer National Insurance on electric cars also rise in April 2027. This is an explainer, not tax advice: check your own position with an accountant.

What is changing in April 2027?

Two things happen at once.

First, the 100% first-year allowance (FYA) for new, unused zero-emission cars and electric vehicle chargepoints ends. HMRC extended it by 12 months in November 2025, to 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax. The professional body ICAEW says Finance Bill 2026/27, introduced in November, does not extend it again, and that cars do not qualify for any other accelerated allowance. The relief has existed in some form since 2002, when it covered cars up to 120g/km.

Second, the writing down allowance (WDA) that replaces it gets smaller. HMRC’s October 2026 policy paper cuts the main rate from 14% to 12% a year for Corporation Tax periods beginning on or after 1 April 2027, and from 6 April 2027 for Income Tax. The main rate was 18% until April 2026. The Budget 2026 document confirms the cut, which still has to be passed in Finance Bill 2026/27.

	Bought by 31 March 2027 (companies)	Bought from 1 April 2027
Relief on a new electric car	100% first-year allowance	12% a year writing down allowance
Pool	Not pooled in year one	Main pool (cars of 50g/km or less)
Share of cost relieved in year one	100%	12% (hybrid rate if your period spans 1 April)
Immediate saving at 25% Corporation Tax	25% of the price	3% of the price

Which cars and businesses are affected?

The FYA applies to new and unused cars with CO2 emissions of 0g/km, in practice fully electric cars, according to GOV.UK’s business cars guidance. Second-hand electric cars already miss out and go straight into the main pool.

Once the FYA ends, new electric cars join the main pool too, because the main rate covers cars with CO2 emissions of 50g/km or less. Cars above 50g/km go into the special rate pool at 6%, which HMRC says is unchanged.

The change matters to any business that buys cars, including on genuine hire purchase where ownership passes to the business. Sole traders who claim capital allowances rather than mileage rates are affected from 6 April 2027; our guide on whether sole traders can claim tax back on an electric car covers how those claims work. Businesses that lease cars deduct the rentals instead, so the end of the FYA does not change that calculation.

How much does buying before 31 March 2027 save?

The tax firm Claritax Books, quoted by EV Fleet World, gives this example. A company with a 31 March year end buys a £60,000 electric car. Bought in late March 2027, the 100% FYA gives a £15,000 Corporation Tax saving straight away. Bought at the start of April, only the 12% WDA applies: relief on £7,200, worth £1,800. And because the April purchase falls into the next accounting period, even that smaller saving arrives a year later.

“The combined effect of these changes is substantial for employers providing electric cars to their employees,” said Ray Chidell, director of Claritax Books.

We have run the same sums on a cheaper and a dearer company car. Our inputs: the 25% main rate of Corporation Tax, a full 12% WDA in the first year, and the purchase price as the cost. These are illustrative prices, not specific models.

Car price	Saving if bought by 31 March 2027	Year one saving if bought from 1 April 2027	Difference in year one
£35,000	£8,750	£1,050	£7,700
£60,000 (Claritax example)	£15,000	£1,800	£13,200
£85,000	£21,250	£2,550	£18,700

Companies with profits of £50,000 or less pay the 19% small profits rate, according to GOV.UK, so their savings in both columns are smaller, and marginal relief applies between £50,000 and £250,000. A company whose accounting period spans 1 April 2027 will get a hybrid rate between 14% and 12% for that period, as HMRC’s policy paper explains, so its first-year figure would be slightly higher than ours.

Is the tax relief lost, or just delayed?

Delayed. Claritax says the change affects timing, not the eventual total: the business still gets relief on the full cost, but over many years rather than at once.

How slowly? A writing down allowance works on a reducing balance, so each year’s 12% is taken from what is left. On our sums, after five years about 47% of the cost has been written down. On the £60,000 car, that is about £28,300 of allowances and roughly £7,100 of tax saved at 25%, against £15,000 in year one under the FYA. When a car is sold, the proceeds come off the pool, and the remaining balance carries on being written down.

For a cash-rich business that keeps cars for a long time, the difference is mostly about cash flow. For a growing business funding a fleet, money in hand now is worth more than relief spread over a decade.

What about company car tax and National Insurance?

The employer’s other costs on the same car also rise in April 2027. GOV.UK sets the benefit in kind (BIK) rate for zero-emission cars at 4% in 2026/27 and a maximum of 5% in 2027/28. The employer pays Class 1A National Insurance on that benefit, at 15% in 2026/27.

Claritax’s figures for the £60,000 car: employer NIC was £165.60 in 2024/25, when the BIK rate was 2% and Class 1A was 13.8%. It is £360 in 2026/27 and rises by a quarter to £450 from April 2027, almost three times the 2024/25 figure.

Here is the same calculation on all three cars. Our inputs: BIK is charged on the list price (the P11D value), which we have assumed equals the purchase price, and Class 1A stays at 15%.

List price	BIK value 2026/27 (4%)	BIK value 2027/28 (5%)	Employer NIC 2026/27	Employer NIC 2027/28	Employee tax at 40%, 2027/28
£35,000	£1,400	£1,750	£210	£262.50	£700
£60,000	£2,400	£3,000	£360	£450	£1,200
£85,000	£3,400	£4,250	£510	£637.50	£1,700

The BIK rise applies to every electric company car from April 2027, whenever it was bought, so buying early does not avoid it. Our full BIK table to 2030/31 shows the later steps, and the company car tax calculator works out the bill for your own car and tax band.

Does the chargepoint allowance end too?

Yes. The 100% FYA for electric vehicle chargepoints ends on the same dates, according to HMRC and ICAEW. ICAEW says another accelerated allowance or a WDA may apply instead, depending on the circumstances.

That matters to businesses installing chargers at depots, offices or staff homes, not to drivers fitting a charger at their own house. If you are planning workplace charging, it may be worth lining up the installation alongside any car purchase before the deadline. Our report on the Workplace Charging Scheme’s final year covers the grant side.

What should businesses do before 31 March 2027?

Practical steps, none of which replace advice from your accountant:

• Check your accounting year end. The 31 March cut-off is for the date the expenditure is incurred. If your year ends in, say, December, a car bought in March 2027 still gets the 100% FYA, and one bought in April falls in the same accounting period, so the relief is not pushed back a year as in Claritax’s example. That period begins before 1 April 2027, so it gets a hybrid writing down rate.
• Check when the expenditure counts. Placing an order is not necessarily the same as incurring the expenditure for tax purposes. Ask how a car ordered now but delivered after April would be treated.
• Check delivery dates. Confirm with the dealer or leasing company when the car will actually be delivered before relying on a March purchase.
• Compare buying with leasing. Lease rentals on zero-emission cars are fully deductible, so once the FYA goes, the sums for buying and leasing may come out differently from today.
• Do not buy a car just for the tax. A 25% saving on a car you do not need is still a 75% cost.

If the car will go to a director or employee, look at the after-tax monthly cost as well. Our guide to Tesla company car tax works through BIK on two popular fleet models, and our report on the leasing industry’s case for a 9% cap after 2030 covers where rates may head next.

Our view

The end of the 100% first-year allowance was set a year ago, so it is not a surprise, but the cut to a 12% writing down allowance makes the step down steeper than many businesses will have planned for. For a company that was going to buy an electric car in the next few months anyway, ordering early enough to complete the purchase by 31 March 2027 brings forward a large tax saving: £13,200 in year one on Claritax’s £60,000 example.

For everyone else, it is a cash flow change rather than a loss, and at 5% electric cars stay in the lowest company car tax band. Talk to an accountant before committing, and buy the car the business actually needs.