Electric vehicle (EV) adoption is surging in the UK. So much so, that there was a significant 18 per cent increase in new registrations in 2023, bringing the total to around 1.1 million fully electric vehicles on the roads as of April 2024.
A substantial proportion of these vehicles, nearly 60 per cent, are registered to businesses, often through employee salary sacrifice schemes.
This trend highlights the growing interest in EVs as a sustainable and economically sensible choice for company cars.
Are there any tax benefits for having an electric company car?
The Government offers various incentives to encourage businesses to transition to electric vehicles.
One of the most appealing is the reduced Benefit-In-Kind (BIK) tax rate for electric cars.
Currently, the BIK rate for EVs stands at just two per cent and is set to increase to five per cent by 2028. This rate applies to employees who use their company car for personal use as well as business purposes.
Additionally, EVs are exempt from Congestion Charges in several Clean-Air Zones (CAZs) such as London, Oxford and Birmingham, though this exemption in London will end in 2025 alongside the road tax exemption.
From a fiscal perspective, businesses purchasing new zero-emission vehicles can benefit from a First Year Allowance (FYA), allowing them to deduct the full cost of the car against their taxable profits in the year of purchase.
This allowance also covers installation costs for EV charging points.
While EVs are not exempt from VAT, businesses can reclaim 50 per cent of the VAT if the car is used solely for business purposes.
Charging infrastructure and support
As the shift towards sustainability gains momentum, the Government is supporting businesses with initiatives like the Workplace Charging Scheme (WCS).
This scheme offers grants that cover up to 75 per cent of installation costs of EV charging points, with a cap of £350 per socket.
Businesses can install a maximum of 40 sockets under this grant, significantly reducing the setup costs of necessary charging infrastructure.
Long-term cost considerations
Despite the higher initial purchase price, the long-term savings from owning an EV can be substantial.
EVs are generally cheaper to run than their petrol or diesel counterparts due to lower fuel costs and fewer mechanical components, which reduces maintenance costs.
Additionally, transitioning to electric helps future-proof your business against rising fuel prices and stricter environmental regulations.
Purchasing vs leasing
Deciding whether to buy or lease an EV can depend on your business’s financial situation and vehicle usage patterns.
Some business owners may prefer to purchase the vehicle because they like owning their vehicles outright.
Whereas, leasing offers a cost-effective and flexible option, especially for businesses that prefer to update their fleet regularly.
It allows businesses to deduct the full leasing costs from profits, provided the vehicle’s emissions are below 50g/km.
For businesses not ready to commit to an outright purchase, leasing offers a way to spread the cost over time.
ESG goals
Incorporating electric vehicles into your business fleet demonstrates a commitment to environmental responsibility, which can enhance your company’s image and appeal to eco-conscious consumers, employees and stakeholders.
Improved ESG (Environmental, Social and Governance) measures contribute to long-term financial sustainability and give them a competitive edge by matching with what society cares about.
Do you need expert advice?
We provide comprehensive support for businesses considering integrating electric cars into their operations.
Our team of experts offer detailed advice on navigating tax reliefs and grants, helping to optimise the financial benefits of your investments.
Want to know more about how electric vehicles can boost your business? Get in touch with our team today.
