Maximising Benefits and Tax Relief on Electric Cars

Over 1.2 million electric vehicles (EVs) are registered in the UK as of 2024, and this figure is only expected to climb over the years ahead.

The government is actively incentivising people and businesses to invest in EVs, which has resulted in some interesting and quite lucrative tax breaks, benefits, and reliefs.

It’s certainly made EVs more attractive and affordable if you’re aware of what EV tax reliefs and benefits are available and how to take advantage.

This blog explores electric vehicle tax reliefs and benefits for both people and businesses.

By the end, you’ll know what benefits are available, how to claim them, and when they’re set to change or expire.

EV Benefits for Individual Drivers

First, let’s take a look at some EV benefits for individuals. These range from tax and congestion charge reductions to grants for home charging equipment.

Road Tax Savings (For Now)

At present, electric cars are exempt from Vehicle Excise Duty (VED), commonly known as road tax. This can save you hundreds of pounds each year compared to petrol or diesel vehicles.

However, this perk expires in April 2025. After that, EVs will be subject to VED like other cars.

So, if you’re eyeing an electric vehicle, purchasing before this date could lock in some savings.

Low or No Congestion Charges

Many cities have introduced Clean Air Zones to tackle pollution. In London, Birmingham, Bristol, and Oxford, electric cars are currently exempt from congestion charges.

This can lead to substantial savings for frequent city drivers. But don’t get too comfortable – these exemptions won’t last forever.

In London, for example, the free pass is set to end in 2025. It’s unclear whether some other form of discount will replace the current exemption.

The rules are different for other cities where EVs may remain exempt long-term, so make sure to stay updated if you live in or travel to a city subject to clean air zones.

Home Charging Grants

The government offers support for installing home charging points through the EV chargepoint grant.

This grant provides up to 75% of the cost of installation, capped at £350. It’s available to homeowners who live in flats and people in rented accommodation, as long as they have their own designated, private off-street parking space.

In Scotland, the Energy Saving Trust offers up to £400 towards the cost of buying and installing charge points at home for people who live in rural areas or buy a used EV.

EV Tax Reliefs and Benefits for Businesses

Now, let’s explore how EVs can benefit businesses and their employees. The benefits are clearly generous, reflecting the government’s push to transition commercial and business fleets to electric.

Reduced Company Car Tax For EVs

Company car tax, or Benefit in Kind (BIK) tax, is where EVs truly shine. For the 2024/25 tax year, fully electric cars are subject to a BIK rate of just 2%.

This is a fraction of the rates for petrol or diesel vehicles, which can be 25% or higher.

Let’s crunch some numbers to gauge the impact:

For an electric car with a £40,000 value, a basic rate taxpayer would pay just £160 in annual BIK tax. A higher rate taxpayer would pay £320.

Compare this to a petrol car with the same value and 130g/km CO2 emissions – a basic rate taxpayer would pay £2,480, while a higher rate taxpayer would pay £4,960. The potential savings are clear as day.

Capital Allowances on EVs

Businesses buying new and unused electric cars can benefit from a 100% first-year capital allowance.

This means you can deduct the full cost of the vehicle from your profits before tax in the year of purchase, providing a hefty upfront tax relief.

Workplace Charging Scheme

The Workplace Charging Scheme (WCS) is a voucher-based scheme that contributes towards the installation of EV chargers at business premises.

It covers up to 75% of the cost, up to a maximum of £350 for each socket, and businesses can claim for up to 40 sockets.

EV Mileage Reimbursement Made Simple

When employees use their electric company cars for business travel and pay for their own electricity, they can be reimbursed at a rate of 9 pence per mile (as of March 2024) without incurring any additional tax.

This is simpler and potentially more beneficial than the system for petrol and diesel cars.

Changes on the Horizon

While the current tax landscape is a goldmine for EV drivers, there are changes looming in the wing mirrors. Namely:

• BIK rates for electric cars will increase by 1% each year for three years from April 2025, reaching 5% in 2027/28.
• Road tax exemption for electric cars will end in April 2025.
• Some city-specific exemptions, like the London Congestion Charge, are set to expire in the coming years.

Despite these changes, EVs are likely to maintain a large tax advantage over conventional vehicles for the foreseeable future.

Maximising Your EV Benefits

To squeeze every drop of value from the available benefits and tax reliefs:

1. Time your purchase: Buying an EV before April 2025 could secure more favourable tax treatment for several years.
2. Explore salary sacrifice: For employees, a salary sacrifice scheme can combine low BIK rates with savings on income tax and National Insurance.
3. Plan your charging strategy: Installing a home charger can help you take advantage of lower off-peak electricity rates. Businesses should look into the Workplace Charging Scheme.
4. Keep detailed records: Maintain detailed logs of business mileage and charging costs to claim all eligible expenses and reimbursements.
5. Consider the bigger picture: When comparing EVs with conventional vehicles, look beyond the sticker price. Factor in tax benefits, lower running costs, and potentially higher resale values.
6. Check your eligibility for grants: Whether you’re a homeowner, renter, or business owner, investigate the various grants available for installing charging points.

The Bottom Line on Tax Benefits For EVs

EVs evidently offer several potent financial incentives for both individuals and businesses.

There’s quite a lot to explore here, so ensure you put some time into understanding all of the benefits available.

Whether you’re an individual driver or a business owner, now is a prime time to explore how EVs could benefit you financially while also doing your bit for the environment.

That said, tax situations can be complex, and individual circumstances vary. For bespoke advice on maximising the benefits of electric vehicles for your specific situation, it’s worth having a chat with a tax professional or accountant.

At Double Point, we have deep experience helping individuals and businesses understand the complexities of electric vehicle taxation.

Get in touch today to see how we can help you make the most of these opportunities.