Company Electric Cars – Fully Charged with Tax Benefits?


Purchasing company electric cars is no longer just about social responsibility, but also about the financial savings your business can make.  Here we set out some of the savings for purchasing an electric car, whether a Plug-in Hybrid Electric Vehicle or a Battery Electric Vehicle.

Government Grant towards Purchase Price

The Government has provided a grant to vehicle dealerships and manufacturers to provide a discount on the price of brand new low-emission vehicles, which have been approved by the Government.  The dealerships provide this discount within the purchase price. There are six categories of grant, dependent upon the type of vehicle: cars, motorcycles, mopeds, vans, taxis

large vans and trucks.  As an example – the grant will pay 35% of the purchase price of the approved vehicle (which must cost no more than £50,000), up to a maximum of £3,000.

Capital Allowances

The largest incentive to purchasing an electric vehicle may well be the Capital Allowances.  A car with CO2 emissions of less than 50g/km are eligible for 100% first year capital allowances.  Therefore for an electric car, you can deduct the full cost from your pre-tax profits.  For example, a car costing £40,000, could provide £7,600 of tax relief in the first year.

Benefits in Kind

Electric company cars registered from 6th April 2020 will enjoy zero tax on Benefit in Kind (BIK) during 2020/2021.  This zero rate also applies to hybrid vehicles with emissions from 1 – 50g/km and a pure electric range of over 130 miles.  The BIK will increase to 1% in 2021/22 and 2% in 2022/23.  This benefits the employee; but there will also be a corresponding benefit to the employer, with a reduction in the Employer’s Class 1A National Insurance Contribution.

Road Tax

Now that vehicle road tax is based on carbon dioxide emissions, pure electric cars are exempt from road tax.  Full details on road tax bands can be found here.

Workplace Charging Scheme

Businesses can apply for a Government grant towards the upfront costs of the purchase and installation of Electric Vehicle charge-points. The contribution is limited to 75% of the purchase and

installation costs, up to a maximum of £350 for each socket, up to a maximum of 40 sockets across all sites for each business.  Further details are here.

Electric Vehicle Home-Charge Scheme

Individuals can apply for a Government grant to cover up to 75% of the cost of one charge-point and

its installation up to a maximum of £350 (including VAT) per household/per eligible vehicle for installations that take place on or after the 1st of April 2020.  Further details are here.

Running Costs of an Electric Vehicle

These benefits and incentives only make sense if the running costs of an Electric Vehicle versus a diesel/petrol vehicle stack up.  Therefore we wanted to provide clients with an indication of the running costs of both types of vehicles.  Website provides a comparison between an Electric BMW i3 and a Petrol BMW 318i.  The source of their information is: Thatcham Research, KeeResources & manufacturer data.  Their data covers the fuel, road tax, depreciation, insurance, servicing and tyres over three years, driving 12,000 miles per year.  They found that the total running cost for the Electric BMW was 67p per mile, whilst the Petrol BMW was 74p per mile. 

Of course all of the above could change with future Budgets. In the meantime if you have any queries in terms of the tax implications of purchasing company electric cars, please contact Andrew or Jackie.

Castletons Accountants

Leave a comment