With the increased recent focus on achieving Net Zero, the government is planning to ban new petrol and diesel car sales by 2030. We review some of the tax issues that businesses and their employees may consider when acquiring or providing an electric vehicle.

At a glance


Capital allowances: sole traders, partnerships and companies

  • From April 2021 electric vehicles are eligible for 100% First-year capital allowances.
    • As they are allocated to the main pool and not separate pools (assuming no private use) there may not be a balancing charge on disposal.
  • The 130% Super-deduction available for companies between April 2021 and March 2023 does not apply to electric cars but does apply to commercial vehicles which would be eligible for plant and machinery allowances such as vans, lorries, tractors and taxis.
  • Electric vehicle charging points are eligible for 100% allowances. The private use element should not be overlooked here as this may lead to the asset having to be separately pooled for CA purposes.

See also Vehicles (4 wheels): Allowances and Vehicles (2 or 3 wheels): Allowances

Benefits In Kind

  • Normal Benefit In Kind rules apply to electric cars and vans provided to employees and the rates of tax depend on the level of CO2 emissions. For 2023-24 this is 2% of the list price.
  • The list price must include the price of the battery.
  • The rules are more complex when it comes to charging electric cars as it depends on whether the car is a company car or a private car, how the car is used and who provides the electricity supply. See Car charging benefits tab. 
  • The usual rules apply regarding reimbursement of fuel costs, see Employees below and Car charging benefits tab.
  • The current Rate per mile for a company-provided electric vehicle is 10p per mile (9p between 1 June 2023 and 1 September 2023).
  • Where the employee uses their own car the mileage rate is the same as for a petrol or diesel car i.e. 45p per mile for the first 10,000 miles, then 25p.
  • The electric vehicle employee owner-driver can also claim 5p per mile for each passenger they take on the same business journey.

See Company cars

Salary Sacrifice


Normal rules for VAT recovery on the purchase or lease of a vehicle apply:

  • VAT cannot be recovered on electric cars unless they are not provided for private use.
  • 50% of the VAT can be recovered on leased cars.
  • VAT can be recovered in full on non-leased commercial vehicles assuming no private use.
  • VAT can be recovered on electric vehicle running costs such as repairs and vehicle excise duty where it applies.

HMRC’s policy on the supply of electricity for electric vehicles is:

  • Supplies of electricity from public charging points are standard-rated.
  • VAT on the business use element of electricity taken from home charging points is only recoverable for sole traders and partners and not for employees/directors. This is however currently being reviewed by HMRC.
  • Where workplace charging is provided to employees the business may recover the VAT.
    • Output VAT must then be charged on any element of electricity provided for private use as a deemed supply.
    • Input VAT may also be recovered on the supply of electricity used to charge electric vehicles where there is business use where the vehicle is charged at a public charging point. 
  • The normal Partial exemption rules apply.
  • Where the employer pays the employee for providing their own electricity for business travel in a company-owned electric car, at a rate of, 8, 5p or 4p per mile (as relevant), HMRC have indicated that the employer cannot currently reclaim input tax on this.


Cars & Vans: VAT

R & C Brief 7 (2021): VAT liability of charging electric vehicles


Benefits In Kind

Electric vehicles as company cars/vans

  • Normal Benefit In Kind rules apply and the rates of tax depend on the level of CO2 emissions.
    • The 2023-24 zero-emission rate is 2%. Hybrids are charged at up to 14%.
    • The Van benefit charge for 2023-24 is nil assuming zero-carbon emissions.
  • Percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1% in 2025-26, 2026-27 and 2027-28.
    • This will bring rates to a maximum of 5% for electric cars and 21% for ultra-low-emission cars.

For non-electric vehicles:

  • Rates for all other vehicle bands will be increased by 1% for 2025-26 up to a maximum percentage of 37%.
    • Rates will then be fixed for 2026-27 and 2027-28.
  • From 6 April 2023, the van benefit charge and car and van fuel benefit charges will increase in line with the Consumer Prices Index (CPI).

See Company cars and Van Benefit Charges

Employer-provided electric vehicle charging

  • Where the employer provides a charging point at or near the business premises:
    • There is no taxable benefit for a company car even with private use allowed.
    • From April 2018 no taxable benefit where the car belongs to the employee assuming the charging point is available to all employees.
  • Where the employer provides a charging point at the employee’s home:
    • No benefit where the car is a company car.
    • Benefit where the employee uses their own car based on the cost to the employer.
  • Where the employer pays for a charge card to allow the employee to charge their car:
    • No benefit where it is a company car.
    • Taxable benefit is based on cost when the car is the employee’s own.

See the Car charging benefits tab for further detail.  

There are two schemes, the Workplace charging scheme and the Electric Vehicle Home charge scheme which provide vouchers/grant towards the cost of installing charging points.

See Plug-in car, van & motorcycle grants

Where an employer pays for a vehicle charging point to be installed at the employee’s home, the provision of the charge point: 

  • Does not result in a Benefit In Kind in respect of a company car available for private use. 
  • Does result in a Benefit In Kind in respect of a private car, even when used for business. 

Mileage allowances and reimbursement of fuel costs

The usual rules apply regarding reimbursement of fuel costs.

  • The current rate per mile for a company-provided electric vehicle is 9p per mile (8p between 1 December 2022 and 1 March 2023k).
  • Where the employee uses their own car the mileage allowance rates are the same as for a petrol or diesel car, 45p for the first 10,000 miles then 25p.

See Authorised mileage rates (own car drivers) and Advisory fuel rates (company car drivers)

Other areas to consider


There are government grants available between £500 and £25,000 for certain electric vehicles.

See Plug-in car, van & motorcycle grants

Vehicle excise duty

No vehicle excise duty currently applies to pure electric vehicles with no emissions.

  • From April 2025, electric cars, vans and motorcycles will begin to pay Vehicle Excise Duty (VED) in the same way as petrol and diesel vehicles. This will be legislated in Finance Bill 2022.
  • New zero-emission cars registered on or after 1 April 2025 will pay the lowest first-year rate of VED, currently £10 a year.
    • From the second year of registration onwards, they will move to the standard rate, currently £165 a year.
  • Zero-emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate.
  • The Expensive Car Supplement (ECS) exemption for electric vehicles will end in 2025.
    • The ECS currently applies for 5 years, to cars with a list price exceeding £40,000.
    • New zero-emission cars registered on or after 1 April 2025 will be liable for the ECS.
  • Zero and low-emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year.
  • Zero-emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans.
  • Zero-emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year.
  • Rates for alternative fuel vehicles and hybrids will also be equalised.

See Autumn Statement: Motoring

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