Electric vehicles (EVs) have long been promoted as cheaper to run and maintain than petrol or diesel cars, but are they actually cheaper for small businesses in 2026? With recent changes to Vehicle Excise Duty (VED) and Benefit-in-Kind (BiK) tax, and rising fleet adoption, the answer isn’t always straightforward.
In this blog, we’ll compare:
What EV ownership and running costs looked like in previous years,
How things stand in 2026, and what upcoming changes could mean for small business budgets.
We’ll look at both single drivers and fleet users, and highlight the practical costs that matter most for businesses managing vehicles.
How EV costs looked in earlier years
Purchase price and early incentives (pre-2025)
In the early 2020s, electric vehicles typically carried a notable premium over petrol or diesel equivalents, partly due to battery costs and lower production scale. That premium has been shrinking over time as battery prices have fallen and manufacturers have scaled up production.
Historically, EVs also benefited from generous tax breaks, including full VED exemptions and lower company car BiK tax rates. For example, EVs were taxed at a BiK rate as low as 2% in 2024/25. These incentives significantly reduced the total cost of ownership for many small-business drivers compared with internal combustion engine (ICE) vehicles.
Running costs and maintenance in previous years
Electric cars have fewer moving parts than petrol or diesel equivalents, reducing servicing and maintenance costs. Independent industry analysis has shown EV maintenance costs can be 30–40% lower over time, with lower fuel costs also contributing significantly to savings.
For small businesses focused on tight margins, these lower recurrent costs were a key part of the EV value proposition.
EV ownership and running costs in 2026
0urchase price and tax landscape
By 2026, the EV pricing and tax landscape will have shifted:
Electric cars are no longer exempt from VED: new EVs now enter at the standard regime rather than £0 road tax.
Company car BiK tax for EVs is rising to 4% in 2026/27, up from 3% in 2025/26, and is planned to increase further in subsequent years.
These changes mean the tax advantage EVs once enjoyed is diminishing, even though they remain lower-taxed than many petrol or diesel alternatives.
From April 2026, fleets benefit from a higher expensive car supplement threshold for zero-emission vehicles, rising from £40,000 to £50,000, reducing the extra VED burden for many mid-range EVs.
Running costs in 2026
Charging an EV remains substantially cheaper than fuelling a petrol or diesel car for most users. Electricity prices for home charging are typically well below the cost per mile of fuel, and EVs have fewer routine maintenance needs.
However, not all charging is as cheap as home charging: public charging incurs 20% VAT, while home charging incurs only 5% VAT, which can reduce the cost advantage of rapid chargers.
Previously exempt costs, such as VED, now apply, and small business owners must factor them into their total cost modelling rather than assuming EVs are uniformly cheaper.
Predicted cost changes affecting EVs in 2026 and beyond
Looking forward to 2026, some potential cost pressures to watch include:
Increasing BiK rates: EV company car BiK will still be lower than petrol cars, but planned rises toward 5% and beyond will increase taxable benefit costs over time.
Loss of first-year capital allowances: from April 2026, 100% first-year capital allowances for EVs and charger infrastructure are ending, meaning businesses may need to spread tax relief over longer periods.
Future mileage tax: a pay-per-mile charge for EVs is scheduled to be implemented in April 2028, which could add about 3p per mile for typical users, broadly equivalent to a continued fuel duty-like charge.
Although the mileage tax doesn’t apply in 2026, its design and introduction are influencing fleet planning and longer-term cost forecasts.
Comparing EVs and petrol/diesel for small businesses
Real-world single driver costs
When comparing a typical EV with a petrol/diesel car used by a single driver:
Fuel/energy costs: EV charging usually remains cheaper per mile than petrol fuelling.
Maintenance: EVs typically cost less to maintain.
tax: the removal of VED exemptions and rising BiK rates reduces but does not eliminate the tax advantage.
Insurance: EV insurance can be higher in some cases, but it is trending closer to ICE costs as volumes grow.
Taken together, an EV still often costs less over the medium to long term, but the gap has narrowed and depends on mileage, charging patterns, and how public charging costs are managed.
Fleet use and operating costs
For small business fleets, the picture is similar but with some nuances:
Fleet fuel spend can fall significantly with electrification when many vehicles are charged off-peak or via business tariffs.
Lease rates and residual values influence overall costs; strong secondary demand for EVs can support better residuals, helping lease rates.
Urban operating zones: EVs can avoid or reduce many ULEZ and clean air charges; however, some zones, like central London, are changing exemptions for EVs, further reducing their advantage.
A fleet manager should model running costs over several years rather than the upfront cost alone to understand the total cost of ownership.
Conclusion: Are EVs cheaper in 2026?
The simple answer is: often yes over the long term, but the gap is smaller in 2026 than it was a few years ago.
Electric vehicles still offer lower fuel/energy and maintenance costs, and company car tax remains favourable, but recent tax and VED changes mean small businesses need to carefully assess total ownership costs rather than assuming EVs are automatically cheaper.
If you’re a small business evaluating a switch to electric, whether for one driver or a whole fleet, start by comparing real-world use cases, factoring in charging costs, business mileage, tax changes and expected vehicle retention periods.
For help understanding how EVs compare with petrol or diesel cars in your specific scenario, explore our business motoring costs guides and fleet fuel card solutions to make more informed decisions that align with your budget and goals.
