Home » Blog » Company Car Tax on Electric Cars

Company Car Tax on Electric Cars

Do I have to pay tax on my electric company car?

Tax on company cars, known as Benefit-in-Kind (BiK), is calculated using a sliding scale which takes into account 1) how much carbon dioxide (Co2) a car emits, and 2) how much the car is worth. The higher the Co2 emissions, the higher a percentage tax you’ll have to pay. And the more your car is worth, the more money that equates to. Your own personal tax bracket is also a contributing factor.

But what about electric cars?

Electric cars do not emit any Co2 on the road and are therefore subject to far less tax than most petrol and diesel cars (which can reach up to 37% for the most polluting company cars).

The current BiK rate for electric cars is 2% for the 2023/24 and 2024/25 financial years. After this time, the Chancellor, Jeremy Hunt, told the Commons in his Autumn Statement ‘company car tax rates will remain lower for electric vehicles . . . and I will limit rate increases to 1% a year for three years from 2025’.  

Even with this increase, if you compare the BiK for a petrol or diesel car with the BiK for an electric car of the same value, the annual saving is thousands of pounds.

Tax on hybrid company cars

If you have a hybrid company car, the distance that you can travel in battery mode will also affect how the BiK rate is calculated. Put simply, the further your car can travel on battery power, the lower the BiK rate.

Conventional hybrids (hybrids that don’t plug-in) can generally travel less than a mile in electric mode. However plug-in hybrids (PHEVs) can travel significantly further in battery mode (up to 70 miles for the most sophisticated PHEVs) and therefore receive a more favourable treatment when it comes to tax (as low as 5% if your car emits under 50g/km of Co2 and can travel 70 miles in battery mode).

Company car tax on electric vans

Currently, if your company van is petrol or diesel and you also use it as your personal car, it will be subject to a flat taxable amount of £3,600 for the 2022/23 financial year (or £720 if you are a 20% tax-rate payer).  However, if you have an electric van, there is no tax to pay, even if you use it as a personal vehicle.

Do electric vehicles make good company cars

Based purely on taxation, electric vehicles make fantastic company cars – the savings are significant.

However, whist electric cars are coming down in price, they still tend to be more expensive to buy than comparable petrol and diesel cars.

You should also consider the logistics of owning an EV; how many miles do you  travel for work and will you need to recharge en-route? Will you be able to recharge your vehicle at home? Can you provide a workplace charging station?

Other incentives for businesses to go electric with their vehicles

The sale of new petrol or diesel cars is scheduled to be banned in the UK from 2035 and there are a number of incentives in place to encourage businesses to make the move to electric cars;

• Workplace Charging Scheme – claim up to 75% of the purchase and installation costs of EV charge points at a workplace.
• Plug-in vehicle grants – apply for a Government grant for electric vans, trucks and taxis
• Reduced employer NICs
• Reduced road tax
• Favourable capital allowance claims

With the deadline set for 2035, businesses will have to make the move to electric vehicles sooner rather than later and we would suggest that you take advantage of these current grants and schemes whilst they are available.

We hope that you’ve found this article helpful. If you require more guidance on this topic or have any other tax queries please get in touch, our experienced team would be happy to help.