The government is committed to helping increase the number of electric vehicles (EVs) on the road in order to meet ambitious climate change targets as part of the Road to Zero initiative, which will improve air quality in major cities. The way motor tax is structured by the government reflects this priority, there’s currently a range of incentives for those choosing EVs.
- Low Benefit-in-Kind tax (BiK)
- Preferential tax position for salary sacrifice schemes
- Government grants
- Employer’s Class 1A National Insurance savings
- Exemptions from Vehicle Excise Duty (VED)
Leave taxes behind
Electric and low-emitting vehicles can offer real financial benefits and cost savings compared to petrol and diesel equivalents. This is especially true when it comes to things like taxes and congestion charges.
Benefit-in-Kind (BiK) at 2%
- For tax year 2023/24 the company car tax percentage for a fully electric, zero emitting vehicle is 2% and it remains frozen at that rate until 2025 – considerably lower than a typical petrol or diesel company car tax rate
Pay zero road tax
- The first-year road tax for a vehicle with emissions of 50g/km CO2 and below is £0, compared to a 130g/km CO2 diesel at £215
- For subsequent year road tax, a petrol or diesel car would pay £150 per year, whereas the electric will continue to pay £0
- Until March 31 2025 electric cars are also exempt from the £325 VED supplement, which is paid for cars with a list price over £40,000
The plug-in wheelchair accessible vehicle grant
To help the government to achieve its Road to Zero targets it has incentivised the take-up of lower emitting vehicles. One of these incentives is known as the plug-in wheelchair accessible vehicle grant, which offers a discount of up to £2,500 on the price of a brand-new wheelchair accessible low-emission vehicle.
Which vehicles are eligible?
The grant will pay for 35% of the purchase price, up to a maximum of £2,500 for cars which are converted to wheelchair accessible, priced below £35,000. These cars must have no tailpipe emissions and be able to travel at least 70 miles.
Plug-in van grant (N1/light commercial vehicles)
- For vans, the maximum available is £2,500 for a small van and £5,000 for a large van, with eligibility criteria of less than 50g/km CO2 and ability to travel at least 60 miles without any emissions at all
- Each business, organisation or individual may receive up to 1000 grants each financial year (01 April – 31 March)
Plug-in truck grant
- For the first 250 truck orders placed, the grant covers 20% of the purchase price, up to a maximum of £16,000. This is limited to 10 per customer. After the order limit is reached, a maximum grant of £5,000 will apply. These vehicles must have CO2 emissions at least 50% less than the equivalent conventional Euro 6 vehicle that can carry the same capacity. They must also be able to travel at least 60 miles without any emissions at all
Plug-in motorcycle grants
- The grant will pay for 35% of the purchase price, up to a maximum of £500 for motorcycles priced below £10,000. These vehicles must have no tailpipe emissions and be able to travel at least 31 miles.
Vehicle category types
For more information on all vehicles, including mopeds and taxis, visit gov.uk.
Electric vehicles are more expensive to manufacture than traditional combustion engine vehicles, as such the government grant offsets some of this initial up-front cost. The grant is available regardless of whether you buy, contract hire or personal lease an electric vehicle. When leasing, the grant will be taken into account when calculating the repayments payable.
Electric vehicle homecharge scheme
Ultra-low emission cars, vans and larger electric motorbikes can get up to £350 towards the cost of installing a charger at home through the Electric Vehicle Homecharge Scheme (EVHS). To be eligible for the grant, the vehicle must be listed on the EVHS eligible vehicles list at the time of installation.
From April 2022, the EVHS will no longer be open to homeowners of bungalows, detached, semi-detached or terraced houses. If you live in one of these types of homes and would like to make use of the EVHS, the charger installation will need to be completed by 31 March 2022 and all claims submitted by 30th April 2022.
People who rent these types of homes as well as the owners and renters of flats will still be eligible to receive the EVHS grant.
Find out more about electric vehicle charging.