Road tax & company car tax on electric cars

EVs aren't just cleaner, they also come with a number of tax incentives to help individuals and businesses drive electric 

Road tax (vehicle tax) on electric cars

First things first, although we often refer to it as 'road tax', such tax doesn't actually exist. What most people mean when saying 'road tax' is 'vehicle tax'. This is a personal tax most car owners have to pay, depending on the carbon dioxide emissions of their car. Most of us pay for road and pavement maintenance through local taxation, regardless of whether we own a vehicle. 

vehicle road tax reminder letter

Do I have to pay road tax (vehicle tax) for my electric car?

It depends on whether you have a pure electric car, a hybrid and also when your car was first registered. 

  • Pure electric cars. These are exempt from the vehicle tax, meaning it’s free to tax them. 
  • Hybrid cars. They're liable to vehicle tax and you can pay anything between £0 - £135 per year depending on the levels of CO2 emissions.
  • All cars registered between 1st March 2001 and 31st March 2017, with CO2 emissions less than 100 g/km. These are exempt from vehicle tax.

 

There's an additional vehicle tax payment for cars registered after 1st April 2017 and a cost of over £40,000. However, this doesn't apply to pure electric cars. Find out more on vehicle tax rates.

Tax on benefits in kind for electric cars

There's currently zero tax on Benefit in Kind (BIK) during 2020 / 2021 for hybrid vehicles with emissions from 1 - 50g/km and a pure electric range of over 130 miles. The electric car tax on BIK rate will increase to 1% in 2021 / 2022 and 2% in 2022 / 2023.

This is a great saving for businesses. As an example, take the new e-Golf and compare this to the Golf GT Petrol 1.5:

Woman about to charge a Volkswagen e-Golf

 

 2020 - 20212021 - 20222022 - 2023
e-Golf (BIK per year)£0.00£55.20£110.30
Golf GT Petrol 1.5 (BIK per year)£1,392£1,392£1,392

 

Other tax credits for electric cars

Electric cars exempt from London Congestion Charge

EV congestion charge exemptions

Electric cars are also exempt from the congestion charge. This is great for anyone planning a trip to a clean air zone. However, company cars which have to travel in and out of cities all the time will hugely benefit from this additional saving. 

The current congestion charge in London is £15 per day per vehicle, between 07:00 and 22:00, every day.

electric car green CO2 emissions for tax benefits

Capital allowances on electric cars

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits.

On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

Tax benefits on EV charging

Electric charged cars vs petrol fuel cars

There are no additional tax reliefs for charging your EV. 

If you charge it at home, you pay a standard VAT of 5%. Business electricity is charged at a standard VAT of 20%. 

However, there is no fuel duty, which currently sits around 58p per litre before tax is applied.

vauxhall corsa-e in orange driving

Lease a brand new electric car

Buying a brand new car isn't for everyone. Lower your out-of-pocket costs and generate zero emissions by leasing an electric car with an affordable monthly rental. No road tax, low maintenance and no depreciation costs.

Find out more

Did you know?: The average company car driver, travelling 18,400 miles a year could save over £1,000 each year by switching to an electric car(1).

Workplace EV charging tax exemptions

Work place electric car charge point office parking

Employers could be exempt from being taxed as a benefit-in-kind when providing electric car charging points. These conditions need to be met:

  • Electricity must be provided via a dedicated charge point
  • The charging facilities must be provided at or near the workplace
  • Charging must be available to either all employees or all the employer’s employees at a particular location


Read this guide on employer taxation when charging points for employees are provided.

Learn more about tax and electric cars

Office for Low Emission Vehicles grants and schemes

Grants, subsidies and schemes for electric cars

Find out what government grants are available for EVs for homes and businesses.

set of spanners on a teal background

Maintenance & servicing of electric vehicles

Learn about maintenance and servicing for your electric car.

Electric vehicles calculate costs

Running costs of an electric car

Find out what it costs to buy and run an electric car.

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