Guide to company car tax on electric vehicles

The electric vehicle market is currently enjoying a big push from vehicle manufacturers, and there are now plenty of cars to choose, whether you opt for fully-electric or hybrid. With the UK Government keen to promote electric vehicle uptake, the tax benefits of kitting out your employees with electric vehicles can be big. 

Here, we take a quick look at some of the tax benefits, plus financial pros and cons of going electric for your commercial fleet, as well as some of the vehicles now on the market. 

Pros for company electric vehicles 

1. Very tax on company cars  

Perhaps the biggest benefit to leasing EVs as your company’s cars is the opportunity to reduce the tax you’ll pay on them. Electric vehicles currently enjoy 1% tax for the year 2022-2022. The rates are due to rise in 2022-2023 to 2%, and to 3% the next year, however, this still offers a significant reduction compared to tax on petrol and diesel vehicles. Class 1A National Insurance Contributions (NIC) are also 1% for electric cars in 2021-2022. 

2. Reduce your expenses 

With your employees whizzing around in electric vehicles, any fuel expenses will be drastically reduced. Installing at-home charging points is the most cost-efficient and convenient way for your employees to charge their EVs. Plus the Government EVHS grant will put up to £350 toward the price of a domestic wall charger, although this is ending in April 2022 for homeowners living in a house or bungalow (homeowners in flats and renters will still be able to apply). This grant is also available for employers, via the Workplace Charging Scheme (WCS), which will offer up to £350 per socket on up to 40 sockets.  

If at-home wall chargers aren’t viable for your employees, there are more and more fast and rapid charging points being installed around the UK. Some can be pricey – up to £15 per charge – but this is still much cheaper than a full tank of petrol or diesel. 

3. Cut your company’s emissions 

By becoming an early adopter and making the transition to an electric fleet, you’ll cut your company’s emissions. This is likely to be attractive to your employees and also your customers. With increased customer expectation on businesses to actively make improvements to emissions and carbon footprint, shifting your fleet of company cars to electric vehicles is a great way to demonstrate your dedication to minimising your impact on the planet. 

Cons for company electric vehicles 

1. Higher lease prices

A higher lease price or up-front cost is arguably the biggest concern when it comes to considering any electric vehicle, whether commercial or domestic. And it’s true, it’s likely to be more expensive in the short-term to lease an electric vehicle. However, with public interest and manufacturer innovation ever-increasing, as well as the Government’s push to popularise electric cars, prices will continue to drop. 

Working out whether the tax benefits outweigh the higher lease price will be different for each business, depending on your lease agreement and fleet size. 

2. Working out running costs 

Not necessarily a con, but working out the running costs for a fleet of EVs will be key. Typically commercial EVs are leased on a cycle of 24 months or 20,000 miles. Taking fuel, servicing, maintenance and repairs into account will be important before you commit. However, all electric, or Battery Electric Vehicles (BEVs) will have significantly lower running costs, as with fewer complex parts to maintain there’s less risk of expensive failures. Plus at-home charging will result in cheaper electricity bills. 

Company cars – BEV vs PHEV 

When it comes to electric or hybrid company cars, there are two main options – Battery Electric Vehicles (BEV) or Plug-in Hybrid Electric Vehicle (PHEV). 

BEVs are purely electric. Without combustion engines, they give off zero emissions. This means the reward in terms of tax savings are bigger, however, driving range can suffer. Typically, you can expect 160-350 miles on one charge. Although if you drive on a motorway, expect your mileage to be at the lower end of the scale. BEVs are most efficient when driving at low speeds, such as through towns, especially as regenerative brakes turn energy from braking into charge for the battery. Unless your employees have a short commute and take few long-distance work trips, at-home charging stations are a must to ward off ‘range anxiety’. 

PHEVs typically have a small petrol engine (usually under 2.0 litres) as well as a battery, with around 20-40 miles of pure electric range. The two work together to provide a higher range than BEVs, but with fewer emissions than standard petrol or diesel vehicles. In order to keep the vehicle running at the most efficient level, daily at-home charging is advised, with occasional at-pump fuel fill ups. However, as PHEVs aren’t purely electric, they don’t enjoy the same tax advantages. While the tax you’ll pay on a PHEV will be lower than a fully petrol or diesel car, as it will produce fewer emissions, it won’t be as tempting as fully-electric rates. 

Electric company cars for 2022 

The range of electric cars on the market is now large. Your perfect fleet car will depend on your business and employee needs, but here’s a quick list of the top manufacturers offering electric cars in the UK today: 

• Renault Zoe 
• Fiat 500 Electric 
• Peugeot E-208 + E-2008 
• Nissan Leaf 
• Volkswagen ID.3
• Honda E 
• Hyundai IONIQ + Kona 
• Kia E-Niro + EV6 
• Skoda Enyaq iV
• Tesla Model 3 
• Jaguar I-Pace 
• Audi e-tron 
• BMW iX3

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