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Company car tax on electric cars
12 June 2024 - 2 min read

Company car tax on electric cars

Company electric cars are currently taxed at 2%, a much lower tax compared to internal combustion engine vehicles, as HMRC seeks to encourage the use of electric vehicles.
The availability and use of a company car for personal reasons, including commuting, is regarded as a benefit in kind (BiK) for taxation purposes. This means that employees are liable to pay company car tax on their cars, including EVs.

Electric company car tax rate

The company car tax on EVs in the United Kingdom is currently set at 2%. However, this will change in the coming years, with the UK government announcing increases to the car tax rate beginning in 2025.

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Upcoming changes to EV tax rates

Electric cars with a range of over 130 miles are still taxed at 2% from April 2024. From April 2025, this increases by 1% for each year over the next 3 years. Here are the company EV tax rates for the next 5 years, beginning with 2023/2024.

Note: if viewing on mobile, turn your device to the side to view the entire table. 

CO2 emissions Electric mileage range 2024/2025 2025/2026 2026/2027 2027/2028
0 N/A 2% 3% 4% 5%
1-50 >130 2% 3% 4% 5%
1-50 70-129 5% 6% 7% 8%
1-50 40-69 8% 9% 10% 11%
1-50 30-39 12% 13% 14% 15%
1-50 <30 14% 15% 16% 17%

If your electric car’s CO2 emission is above 50g/km, the HMRC provides guidance on working out your company car benefits rates on their website.

Calculating employees' Benefit in Kind tax

If you would like to calculate the amount of BiK tax that's payable, use this simple equation:

Benefit In Kind Tax = P11D x Benefit in Kind x Tax

P11D - Value of car
Benefit in Kind (BiK) -BiK tax rate
Tax - Employee’s income tax band

If you need help working out the value of your electric car benefit, the HMRC company car and fuel benefit calculator can help.

Company car tax on hybrid cars

Since hybrid cars tend to have a lower CO2 emission than petrol cars, you can expect to see a lower BiK rate for any company car tax on hybrid cars. To work out the company car tax for your hybrid car, you will need to consider your CO2 emissions and electric mileage range. For a company car with CO2 emissions between 0 and 50g/km:

Electric mileage range Benefit in kind rate
Less than 30 miles 14%
30 to 39 miles 12%
40 to 69 miles 8%
70 to 129 miles 5%
130 miles and above 2%

To calculate the company car tax charge for a hybrid car, you will also need to know its P11D value, which often refers to the listed price of the vehicle.

Hybrid company car tax = P11D value x BiK percentage x income tax bracket

Other incentives for electric cars in companies

When it comes to choosing a favourable company car in the eyes of taxation, electric cars certainly have their merits. With mounting relief schemes and lower company car tax rates than its petrol counterparts, the case on whether it is worthwhile having an electric company car is gaining ground. These include: 

Reduction in National Insurance Contributions

Employers are liable to pay national insurance on company benefits like cars. It is often based on the car’s CO2 emission, so it is very likely that an electric car would garner much lower NIC rates.

Workplace charging scheme

Employers can access The Workplace Charging Scheme, which provides up to 5% of the purchase and installation costs of EV charging points at a workplace. This funding is limited to £350 per socket and 40 sockets per site.

Exemption from emission and congestion charges

Electric vehicles also enjoy exemptions and reduced fees in a lot of congestion and low-emission zones across the UK.

Electric car salary sacrifice scheme 

The electric car salary sacrifice scheme allows employees to save up to 60% by deducting a portion of their pre-tax salary each month to cover the cost.

FAQ

The company car tax on electric cars will change from April 2025. From then, the benefit in kind (BiK) will increase by 1%, up to 3%. This will continue until 2028, with the BiK rate increasing by 1% each year.
Yes, there are several avenues for tax relief aimed at companies that purchase electric cars. One key example is the capital allowance claim, which allows a business to deduct a percentage of the cost from its profits before tax. Companies that purchase electric cars can benefit from the 100 % first-year allowance.

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