Electric Vehicles: Update 2025

Businesses/employers

Capital allowances: sole traders, partnerships and companies

Cars

• New electric cars with zero CO₂ emissions are eligible for 100% First-year capital allowances.
  • It was proposed in Autumn Statement 2024 that the availability of 100% First Year Allowances (FYAs) on zero-emission cars would be extended until 31 March 2026 for Corporation Tax purposes and 5 April 2026 for Income Tax purposes.
  • If the 100% FYA is not claimed on the full expenditure, the balance is added to the main rate pool for 18% Writing Down Allowances (WDAs).
  • For unincorporated businesses, if there is private use: allocate the asset to a single asset pool and restrict allowances accordingly.
• Second-hand electric cars with zero-emissions, and hybrid cars (new or second hand) with CO₂ emissions of 50g/km or lower, are eligible for 18% WDAs in the main pool. 
  
  • For unincorporated businesses, if there is private use: allocate the asset to a single asset pool and restrict allowances accordingly.

Commercial vehicles

• New zero-emissions commercial vehicles qualify for 100% FYAs or the 100% Annual Investment Allowance (AIA).
  • 100% FYAs for new zero-emissions goods vehicles are due to end on 31 March 2025 (companies) or 5 April 2025 (unincorporated businesses).
• Second-hand zero-emissions commercial vehicles and commercial vehicles that emit CO₂ qualify for the 100% AIA. 
• In both cases above: 
  • If 100% allowances are not claimed on the full expenditure, the balance is added to the main rate pool for 18% WDAs.
  • For unincorporated businesses, if there is private use: allocate the asset to a single asset pool and restrict allowances accordingly.

Charging points

• Electric vehicle charging points are eligible for 100% FYAs.
  • The private use element should not be overlooked here for unincorporated businesses as this may lead to the asset having to be separately pooled for capital allowance purposes.
  • It was proposed in Autumn Statement 2024 that the availability of 100% FYAs on electric vehicle charging points would be extended until 31 March 2026 for Corporation Tax and 5 April 2026 for Income Tax 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. The rates of tax depends on the level of CO₂ emissions.
• For pure electric cars with no CO₂ emissions, the rates are:
  • 2% of the list price for 2024-25.
  • 3% of the list price for 2025-26.
  • 4% of the list price for 2026-27.
  • 5% of the list price for 2027-28.
• The van benefit charge for zero-emission vans in 2024-25 and 2025-26 is £nil.
• 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.
  • A specific Rate per mile for company-provided electrics vehicle applies. This rate is reviewed quarterly.
• 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

Double-cab pickups

Changes to the classification of double-cab pickups were announced at the 2024 Autumn Budget from 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax. 

Capital allowances

• Double cab pick-up vehicles with a payload of one tonne or more will be treated as cars for capital allowance purposes where expenditure is incurred on or after 1/6 April 2025.
• The existing capital allowances treatment will apply to vehicles purchased before 1/6 April 2025.
• Transitional arrangements will apply when an amount of expenditure is incurred on a double cab pick-up as a result of a contract entered into before April 2025 and the expenditure is incurred on or after that date but before 1 October 2025.

Employment taxes

• Double cab pick-up vehicles with a payload of one tonne or more will no longer be treated as goods vehicles, but will instead be cars for benefit-in-kind purposes.
• Transitional arrangements will apply for employers who have purchased, leased, or ordered a double cab pick-up before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

Salary Sacrifice

• The 2017 changes to Optional Remuneration Arrangements (OPRA) and salary sacrifice did not apply to ultra-low emission vehicles (below 75g/km). As the benefit is based on the Benefit In Kind rate which is low for these vehicles, salary sacrifice can still be beneficial.

VAT

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 the advisory fuel rates, HMRC have indicated that the employer cannot currently reclaim input tax on this.

See:

Cars & Vans: VAT

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

Employees

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 2024-25 zero-emission car rate is 2%. Hybrids are charged at up to 14%.
  • The Van benefit charge for 2024-25 is nil assuming zero CO₂ emissions.
• Percentages for electric (including hybrid) cars 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 17% for hybrids.
• Percentages for pure electric cars will increase by 2% in 2028-29 and 2029-30. Percentages for hybrids will increase by 1% in each year.
  • This will bring rates to a maximum of 9% for electric cars and 19% for hybrids.

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 7p per mile.
• 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

Grants

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. 
• New zero-emission cars registered on or after 1 April 2025 will pay the lowest first-year rate of VED, currently £10 a year (frozen to 2029-30).
  • From the second year of registration onwards, they will move to the standard rate: £195 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 £335 a year for most vans.
• Zero-emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £25 a year.
• Rates for alternative fuel vehicles and hybrids will also be equalised.

See Autumn Statement: Motoring

The following table summarises the Benefit In Kind position for charging electric cars based on: 

• Whether the car is a company or personal car. 
• Whether the car is used exclusively for business purposes, exclusively for private purposes or a mixture.
• Where the car is charged and who provides the electricity.

Where employees charge wholly electric company cars at home, which are available for private use, it is recommended that any reimbursements claimed are calculated using an accurate reading of the amount of electricity used and its cost.

• This is to avoid any reimbursement paying part of the employee’s domestic electricity bill, as this would be liable to Income Tax and NICs.

HMRC's guidance also sets out the position in relation to electric car batteries:

• The car battery is integral to the car itself. The value of the battery will be reflected in the list price, unless specifically excluded.

Finance Act 2023 has announced the benefit in kind rates which will apply to low emission and electric vehicles to the 2027-28 tax year. Rates for 2028-29 and 2029-30 were proposed at the 2024 Autumn Budget.

From the 2025-26 tax year, the appropriate percentages are as follows:

From 2025-26, cars with CO₂ emissions in excess of 75g/km will have an appropriate percentage equal to the lower of:

• 21% plus 1 percentage point for each 5 grams/km the 75g/km threshold is exceeded, and;
• 37%.

Rates increase as follows in 2026-27: 

These rates increase as follows in 2027-28: 

These rates increase as follows in 2028-29: 

For 2028-29, cars with CO₂ emissions in excess of 75g/km will have an appropriate percentage equal to the lower of:

• 22% plus 1 percentage point for each 5 grams/km the 75g/km threshold is exceeded, and;
• 38%.

These rates increase as follows in 2029-30: 

For 2029-30, cars with CO₂ emissions in excess of 75g/km will have an appropriate percentage equal to the lower of:

• 23% plus 1 percentage point for each 5 grams/km the 75g/km threshold is exceeded, and;
• 39%.

Useful guides on this topic

Plant & machinery (self-employed): Allowances
A person who is engaged in qualifying activities is able to claim plant and machinery allowances when they incur qualifying expenditure.

Plant & machinery: Allowances
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Super-deduction & First Year Allowances
What is the new Super-deduction allowance? When does it apply and what is the rate of allowance? What other First Year Allowances (FYAs) are available?

Company cars
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Cycle to Work Scheme
The Cycle to Work scheme permits an employer to provide cycles and/or associated safety equipment to employees tax-free.

Vans and Commercial vehicles
What is the benefit in kind charge if you drive a company van? What is the van fuel benefit? What is the tax on zero-emissions vans?

Cars & Vans: VAT
What is a car for VAT? What is a van for VAT? What VAT can be recovered on a car that is bought? Leased? What about fuel? Or mileage reimbursements? 

VAT Toolkit
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