The UK’s shift to electric vehicles is gathering pace, driven by government mandates, tax efficiencies and improving technology. With corporate fleets accounting for a large share of new vehicle registrations, their transition to EVs plays a central role in the path to net zero by 2050. From salary sacrifice schemes to lower maintenance costs, a combination of regulatory and commercial factors is prompting companies to electrify, though challenges such as residual value instability and charging infrastructure persist.

As the UK continues to prioritise sustainability and environmental consciousness, so the automotive landscape is undergoing a dramatic transformation.

At the forefront of this change is the rapid rise of electric vehicle (EV) demand across UK car fleets. Not only is this shift reshaping the way businesses operate, but it also contributes significantly to the ambitious goal of achieving net-zero emissions by 2050. The increase in EV adoption within UK car fleets can be attributed to several factors. Let’s consider some of the key drivers behind this electrifying trend and explore its implications for the future of transportation in the UK.

Regulations and tax incentives

1. Zero Emission Vehicle (ZEV) mandate: The government’s ZEV mandate for 2025 requires that 28% of new car sales and 16% of new van sales be zero-emission vehicles. The mandate aims to phase out the sale of new petrol and diesel cars by 2030, with plug-in hybrid electric (PHEV) and internal combustion engines (ICE) for vans scheduled by 2035.

• Company salary sacrifice schemes: An EV salary sacrifice scheme offers significant tax advantages for employees. The scheme works by deducting the lease cost of the EV from an employee’s pre-tax salary, therefore reducing their taxable income before deductions are applied. This results in savings of both income tax and National Insurance contributions while allowing drivers to access a higher-priced vehicle at an affordable monthly cost.

• Company car tax benefits: EVs attract significantly lower benefit-in-kind (BIK) tax rates, 3% in 2025. When compared to their petrol and diesel counterparts, EVs make an extremely attractive option for company car fleets and their drivers.

• Clean air zones: The introduction of clean air zones in London and major cities across the UK has prompted fleet operators to seek cleaner alternatives to avoid charges and restrictions.

• Vehicle Excise Duty (VED): Effective 1 April 2025, the rate of tax payable for vehicles with a list price of < £40,000* is £10 for the first year. Thereafter, it’s £195 a year (*The standard VED rate for all cars is £195 per year after the first year of ownership). Cars with a list price of more than £40,000 will pay an additional £425 from years two to six, a total of £620 a year, or £3,100 over six years.

Technological advancements and EV pricing

The rapid advancement of EV technology has played a crucial role in boosting demand among fleet operators. Technological improvements have addressed many of the concerns that previously constrained fleet operators from embracing electric vehicles.

Modern electric vehicles now offer:

1. Increased range: Many new EVs can travel 250–300 miles on a single charge, mostly alleviating range anxiety for drivers. Furthermore, according to the Society of Motor Manufacturers and Traders (SMMT), the average range of an electric car is 236 miles, which is three times the average distance driven in a week.

• Faster charging & charging anxiety: The increase in volume of public charging stations, including the development of rapid and ultra-rapid charging infrastructure, has significantly reduced concerns for drivers and downtime for fleet vehicles. That being said, ‘charging anxiety’ has replaced ‘range anxiety’ and, frankly, remains a concern for many.

• Improved performance: EVs now offer comparable or superior performance to their internal combustion engine (ICE) counterparts, with instant torque and smooth acceleration.

• Affordability & accessibility: The significant arrival of new Chinese EV entrants, focused on winning market share with very attractively priced vehicles, drives consumer awareness and further bolsters uptake in EVs.

• Lower maintenance costs: Typically, an EV has significantly fewer moving parts than a petrol or diesel car. Including the electric motor, an EV’s powertrain has around 20 moving parts, whereas a traditional internal combustion engine (ICE) can have over 2,000. This contributes to reduced maintenance and fewer potential failure points for EVs.

Going green and corporate responsibility

As climate change continues to dominate global discussions, businesses are increasingly recognising their role in reducing carbon emissions. Many UK companies are setting ambitious sustainability targets, and transitioning their fleets to EVs is a tangible way to demonstrate their commitment to environmental responsibility.

Moreover, consumers and stakeholders are becoming more environmentally conscious, often favouring businesses that prioritise sustainability. As a result, companies are finding that adopting EVs into their fleets not only reduces their carbon footprint but also enhances their brand image and reputation.

Cost savings and TCO

While the initial purchase price of EVs may still be higher than their ICE counterparts, this is changing. With new Chinese products in the market, fleet operators are increasingly recognising the long-term cost benefits of EVs. However, this comes with one significant caveat: residual value forecasting and management. The volatility we have witnessed over the past 12 months, with many OEMs significantly reducing list prices of their EVs, has created significant commercial issues for lessors. Hopefully, that uncomfortable period is behind us, and residual value certainty will prevail.

Notwithstanding residual value instability, the total cost of ownership (TCO) for electric vehicles is often lower due to:

1. Lower fuel costs: Electricity is generally cheaper than petrol or diesel, resulting in significant savings in running costs.

• Reduced maintenance: With fewer moving parts and no need for oil changes, EVs typically require less frequent and less expensive maintenance.

• Tax incentives: As mentioned, EVs benefit from lower tax rates, further reducing overall costs for businesses and their drivers.

• Congestion charge exemption: In cities like London, EVs are currently exempt from congestion charges, providing additional savings for fleet operators. (However, Transport for London has recently revealed plans to end this exemption, possibly from 2 January 2026.)

What next?

As the UK edges closer to its 2050 net-zero target, the electrification of corporate car fleets stands out as a critical enabler of progress. Incentivised by policy levers and commercial advantages, businesses are increasingly aligning operational decisions with environmental objectives. Yet, this transition is not without its complexities — from evolving taxation frameworks to infrastructure constraints and residual value risk.

The challenge for fleet operators will be to navigate these variables while maintaining cost efficiency and operational reliability. What is clear is that the direction of travel is set: electric mobility is no longer an aspirational concept, but an operational imperative for companies serious about decarbonisation.

Paul Bennett is a Senior Partner at Madox Square LLP