Everything UK drivers and businesses need to know about electric car depreciation in 2026. How fast EVs lose value, how they compare to petrol, the HMRC 100% tax relief for companies, the impact of battery health, ZEV mandate pressure on residuals — plus a free EV depreciation calculator for any budget and model.
Two calculator modes — standard EV depreciation schedule by annual rate, and a full HMRC tax relief calculator showing the 100% First-Year Allowance for zero-emission company cars.
Electric cars in the UK continue to depreciate faster than petrol and diesel equivalents in 2026, though the gap is narrowing. According to Cox Automotive data, EVs aged under 12 months retained approximately 56% of their original cost new (OCN) by October 2025 — up from 52% in January 2025, showing early signs of stabilisation after years of steep decline. For the broader market, average EVs lose around 61% of their value in the first three years compared to approximately 47% for equivalent petrol cars — a gap of roughly 14 percentage points.
The key driver of continued EV depreciation pressure is the ZEV mandate, which requires manufacturers to ensure an increasing proportion of new car sales are zero-emission. To meet these targets, manufacturers are discounting new EVs aggressively — particularly toward year-end — which immediately drags down the value of equivalent used EVs on the forecourt. Used EV prices fell nearly 10% year-on-year into 2026 according to Electric Car Scheme market analysis.
However, the picture is far from uniform. Premium brand EVs — particularly Tesla and Porsche — have significantly better residual values than budget or newer-brand entrants. Battery size, charging speed, range and software update capability all play significant roles in determining how well an individual EV holds its value.
The headline data from 2026 shows the average EV still depreciates faster than a petrol equivalent in the first three years — losing approximately 61% vs 47% of original value. However, the comparison is more nuanced than a single number suggests. Here is a full side-by-side breakdown:
| Metric | ⚡ Electric Car (Avg UK 2026) | ⛽ Petrol Car (Avg UK 2026) |
|---|---|---|
| Year 1 depreciation (typical) | 25–35% | 15–25% |
| 3-year total depreciation | ~61% | ~47% |
| 5-year total depreciation | ~72–78% | ~60–65% |
| Worst-affected age bracket | 1–2 years old | Year 1 (first registration) |
| Key depreciation driver | Battery tech, ZEV mandate, new discounts | Mileage, condition, new plate launches |
| HMRC capital allowance (company) | 100% FYA (zero-emission) | 6% WDA (51g/km+) or 14% WDA (1–50g/km) |
| Net cost after CT relief (25%) | 75% of OTR (company pays) | 98.5–99.5% of OTR (Year 1 WDA saving only) |
| Running cost advantage | Lower fuel / charging cost | Higher fuel cost |
| 2030 outlook | Supported by petrol ban | Residuals under pressure as 2030 approaches |
| Insurance cost | Typically higher (repair costs) | Lower average premium |
| Overall total cost of ownership (TCO) | EVs often lower TCO for company cars and high-mileage drivers due to fuel savings + HMRC 100% FYA — despite higher depreciation rate | |
EV depreciation is driven by a different mix of factors than petrol and diesel cars. Understanding these helps you choose a model that holds its value better.
Battery SOH is now the single biggest factor in used EV pricing in 2026. A car with 90%+ SOH commands a significant premium over one at 75% SOH — even if the age and mileage are identical. Battery degradation report availability (via OBD/diagnostic tools) is becoming a standard part of used EV sales.
Tesla, Porsche and BMW retain EV value significantly better than budget or newer brands. Brand strength, Supercharger network (Tesla), software update longevity and parts availability all affect buyer confidence in the used market. Chinese brand EVs currently face the steepest depreciation in the UK.
Real-world range — not WLTP — is a critical residual value driver. Cars with 250+ real-world miles hold value significantly better than shorter-range models. As battery technology improves, older shorter-range EVs face accelerated obsolescence depreciation compared to newer long-range equivalents.
Maximum DC rapid charging speed affects buyer appeal. Cars that charge at 100kW+ retain value better than those limited to 50–75kW. This is becoming increasingly important as the UK public charging network expands — buyers are unwilling to pay full price for a car that charges slowly at motorway services.
The ZEV mandate requires manufacturers to sell an increasing share of EVs. To hit targets, they are discounting new EVs heavily — especially toward year-end. This immediately devalues equivalent used models on the forecourt. Indicata identified this as the single biggest risk to UK EV residual values entering 2026.
EVs retain value better in areas with good charging infrastructure — particularly London (Congestion Charge exemption), Edinburgh and other major cities. EVs in rural areas with limited charging access face higher depreciation as buyer demand is lower. The geographic variation in EV residuals is greater than for petrol cars.
Over-the-air (OTA) software updates are increasingly valued. Cars that receive regular manufacturer updates for range, performance and features (primarily Tesla, but growing among others) hold value better. Cars that are no longer supported by the manufacturer face accelerated functional obsolescence depreciation.
As with all cars, colour and specification affect EV residuals. Standard colours (white, grey, black) retain value better than unusual choices. Technology packs that add meaningful functionality (better autopilot, premium audio, heat pump) tend to add more residual value than their cost. Avoid unusual or niche options.
Battery State of Health (SOH) has become the dominant factor in used electric car pricing in 2026. According to ChangeCarUK's 2026 market analysis, SOH is now the single biggest determinant of a used EV's final sale price — more influential than mileage or age in many cases. As the market matures, buyers are increasingly sophisticated about battery health, and asking for diagnostic reports before purchase.
SOH is expressed as a percentage of the battery's original capacity that remains functional. A new EV has 100% SOH. Over time, through charge cycles, temperature exposure and usage patterns, the SOH gradually declines. Modern EV batteries are engineered to retain 70–80% capacity over 100,000 miles or 8 years — but real-world results vary significantly by model, usage and charging habits.
Brand choice is one of the most significant controllable factors in EV depreciation. The figures below represent approximate 3-year residual values as a percentage of original cost new (OCN) based on 2026 UK used car market data. Premium brands with established charging networks and strong software ecosystems significantly outperform budget or newer entrants.
For UK businesses, the HMRC capital allowance treatment of electric company cars in 2026 is one of the most generous tax reliefs available for any business asset. Zero-emission cars (0g/km CO₂) — essentially all battery electric vehicles (BEVs) — qualify for a 100% First-Year Allowance (FYA). This means a company can deduct the entire purchase cost of an electric car against its taxable profits in the year of purchase, generating an immediate Corporation Tax saving of 25% (or 19% for small profits rate).
| Car CO₂ Emissions | Allowance Type | Year 1 Deduction | Pool | WDA Thereafter |
|---|---|---|---|---|
| 0g/km — Zero-Emission (EV / BEV) | 100% First-Year Allowance | 100% | N/A (fully written off) | None required |
| 1–50g/km (Plug-In Hybrid / PHEV) | Main Pool WDA | 14% (from Apr 2026) | Main Pool | 14% per year |
| 51g/km+ (Petrol / Diesel / most hybrids) | Special Rate Pool WDA | 6% | Special Rate Pool | 6% per year |
The UK's Zero Emission Vehicle (ZEV) mandate requires manufacturers to sell an increasing proportion of zero-emission vehicles each year — rising to 80% of new car sales by 2030 and 100% by 2035 (when new petrol and diesel car sales end). The mandate is the single most significant structural force shaping UK EV residual values in 2026 and beyond.
The immediate effect has been that manufacturers — particularly those struggling to hit their mandate targets — have been discounting new EVs heavily, especially in the final quarter of each year. This creates a direct negative feedback loop for used EV values: when new EVs are cheaper, used EVs of the same model become less competitive, and their values fall. Indicata's Q1 2026 Market Watch report explicitly identified the ZEV mandate as the biggest destabilising factor for used EV residual values in the UK market.
The longer-term picture is more nuanced. As the 2030 petrol/diesel ban approaches, petrol car residual values are expected to face increasing pressure — particularly for older, higher-emission vehicles. EVs should structurally benefit from being the only new car option post-2030, supporting used market demand. Cox Automotive forecasts EVs reaching a 36% share of used car registrations by 2028 — though still short of the ZEV mandate's pace of new car targets.
| Year | ZEV Mandate Target (% of new sales) | Implication for EV Residuals |
|---|---|---|
| 2026 | 22% | Manufacturers discounting new EVs to hit target — ongoing residual pressure |
| 2027 | 28% | Discount pressure likely to continue — watch Q4 new car deals |
| 2028 | 52% | Major step change — largest risk year for used EV values if new supply floods market |
| 2029 | 66% | Petrol residual pressure accelerates — EV share of used market rises |
| 2030 | 80% | Petrol/diesel ban takes effect — structural EV support begins |
| 2035 | 100% | All new cars zero-emission — EV used market fully mainstream |
While you cannot fully control the market forces driving EV depreciation, these steps will help you choose a car that holds its value better and maximise the return when you come to sell or defleet.
Common questions about electric car depreciation, HMRC tax relief and residual values in the UK for 2026.