10 Tax Advantages of Having an Electric Company Car

Electric vehicles (EVs) are becoming increasingly popular with businesses and employees, and the UK tax system currently makes them one of the most tax-efficient company car options available.

For many employees, choosing an electric company car can significantly reduce both their tax bill and the costs of running a vehicle. Here are what we believe are the ten key advantages:

1. Extremely Low Benefit in Kind (BIK)

Fully electric company cars currently attract a BIK rate of just 3%, which is dramatically lower than rates for petrol or diesel vehicles, meaning less income tax is to be paid compared to traditional vehicles.

Although this is set to increase to 9% by 2029/30, it will remain to be the most tax efficient company car rate available.

2. Salary Sacrifice Can Reduce Taxable Income

Many electric company car schemes operate via salary sacrifice. In these arrangements, an employee gives up part of their gross salary in exchange for the vehicle.

Due to the low BIK rate, the taxable benefit is usually much less than the salary given up, therefore taxable income can reduce which may help preserve eligibility for benefits such as:

• Tax-Free Childcare (UK scheme)

• High Income Child Benefit Charge thresholds

• Personal allowance limits around £100,000 income

For some families, maintaining access to these benefits can create substantial additional tax savings.

3. No Personal Purchase Cost

When a company provides the vehicle, the employee does not need to finance or purchase the car themselves.

Given the relatively high purchase price of many new vehicles, this removes a significant upfront cost for the employee.

4. No Exposure to Depreciation

Cars typically lose a large portion of their value over time. With a company car, that depreciation risk sits with the employer rather than the employee.

This means employees can enjoy a new vehicle without worrying about its resale value.

5. Charging at Work Is Tax-Free

If an employer provides electric vehicle charging facilities at the workplace, employees can charge their company car tax-free, even when the electricity is used for private journeys.

6. Convenient Home Charging

For home charging, if the employer reimburses electricity costs, there is no tax charge provided the reimbursement relates solely to the company car.

Installation of home EV charging units can also be provided on a tax and NIC-free basis through salary sacrifice arrangements.

7. Electric Charging Cards Can Be Provided

Employers can supply employees with charging cards that provide access to public charging networks. This simplifies administration and avoids employees having to personally pay for charging and reclaim the costs.

8. Insurance Often Included

Many company car schemes include insurance as part of the package, removing the need for employees to arrange or pay for separate cover.

9. Repairs and Maintenance Covered

Company car arrangements often include repairs, servicing and maintenance, meaning employees are protected from unexpected repair costs.

Car valeting of say £25 per week, should also be included as part of the Benefit in Kind.

10. Predictable Costs and Peace of Mind

Electric company cars offer a high degree of financial certainty. With low tax rates and many running costs covered by the employer, employees can enjoy a modern vehicle with predictable and manageable costs.

In Summary

For many employees, switching to an electric company car can result in substantial tax savings while also supporting greener transport choices.

If you require further information, please get in touch.