Tax and BIK for Electric Vehicles

Electric cars (EV’s) are no longer just about the “social responsibility” and driving a Toyota Prius! There are a number of tax benefits to driving an EV, including some serious tax incentives such as electric car benefit in kind (BIK).

As we ‘slowly’ come out of lockdown, rising fuel costs can put a financial strain on many residential and business drivers, the lower cost of running an EV is one of the main incentives to make the switch to electricity instead of fuel.

The benefit of switching electricity means that domestic EV users only pay 5% in tax. Business users are required to pay 20% tax on electricity in the same way as fuel at the pump. However, there is no fuel duty tax on electricity like there is for petrol/diesel, which currently sits around 58p per litre before tax is applied.

With the electricity costs averaging at just 3.9p per mile to power a Nissan LEAF, compared to an average of 9.2p per mile on a Ford Fiesta, the savings for those travelling longer distances can be significant.

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Charging an Electric Vehicle at work

If charging at an EV work, this could bring the cost down even further. This is because one of the actions in place to persuade employers to provide charging facilities for EV’s and plug-in hybrid vehicles at the workplace, is to exempt employer provided electricity from being taxed as a BIK.

There are some conditions that need to be met in order to for an employer to qualify: 

  • Electricity must be provided via a dedicated charge point
  • The charging facilities must be provided at or near the workplace
  • Charging must be available to either all employees or all the employer’s employees at a particular location

Electric Vehicle BIK (Benefit In Kind)

 Tax and BIK for Electric Vehicles - Image 1

Tesla Model S Long Range

Tax and BIK for Electric Vehicles - Image 2

Mercedes S 350d AMG Line Premium

P11D Value
(based on list prices on car configurators)
£83,925£84,275
0-60 mph3.1 seconds6.4 seconds
Emissions0g CO2 /km184g CO2 /km
Benefit in Kind Rate2%37%
2021-22 monthly
Benefit in Kind cost
@40% tax rate
£83,925
x 1% x 40% / 12
£27.98 per month
£84,275
x 37% x 40% / 12
£1,039.39 per month
2022-23 monthly
Benefit in Kind cost
@40% tax rate
£83,925
x 2% x 40% / 12
£55.95 per month
£84,275
x 37% x 40% / 12
£1,039.39 per month
2022-23 monthly
Benefit in Kind cost
@40% tax rate
£83,925
x 2% x 40% / 12
£55.95 per month
£84,275
x 37% x 40% / 12
£1,039.39 per month

Which vehicle would you choose?

Personally, I’d choose the Tesla – Would you?

Benefit In Kind rates for cars registered after April 2020

The table below shows the percentage BIK rates, depending on vehicle CO2 emissions from conventional fuel (only >0 for PHEVs) and using WLTP figures. The table represents electric, petrol and diesel related BIK rates. The BIK rates are frozen at the 2022-23 level for an additional 2 years, meaning for zero emission vehicles you’ll pay 2% until 2025.

Vehicle CO2 emissionsBenefit in Kind rate
(Electric, Petrol, RDE2 Diesel)
2021-22
Benefit in Kind rate
(Electric, Petrol, RDE2 Diesel)
2022-23
Benefit in Kind rate
(Electric, Petrol, RDE2 Diesel)
2023-24
0 g/km0.010.020.02
1-50 g/km (electric range >130 miles)0.010.020.02
1-50 g/km (electric range 70-129 miles)0.040.050.05
1-50 g/km (electric range 40-69 miles)0.070.080.08
1-50 g/km (electric range 30-39 miles)0.110.120.12
1-50 g/km (electric range <30 miles)0.130.140.14
51-54 g/km0.140.150.15
55-59 g/km0.150.160.16
60-64 g/km0.160.170.17
65-69 g/km0.170.180.18
70-74 g/km0.180.190.19
75-79 g/km0.190.20.2
80-84 g/km0.20.210.21
85-89 g/km0.210.220.22
90-94 g/km0.220.230.23
95-99 g/km0.230.240.24
100-104 g/km0.240.250.25
105-109 g/km0.250.260.26
110-114 g/km0.260.270.27
115-119 g/km0.270.280.28
120-124 g/km0.280.290.29
125-129 g/km0.290.30.3
130-134 g/km0.30.310.31
135-139 g/km0.310.320.32
140-144 g/km0.320.330.33
145-149 g/km0.330.340.34
150-154 g/km0.340.350.35
155-159 g/km0.350.360.36
160-164 g/km0.360.370.37
165-169 g/km0.370.370.37
>1700.370.370.37

Don’t worry if you think that you’ll lose out by driving a van, as Electric Vans as also appearing on the market.

Tax for Electric Company Vans

If your company provides you with a zero-emission van for personal use, that van is subject to a van benefit charge. This is currently set at £3,500 for the 2021-22 financial year.

While electric vans used to receive a reduction on the van benefit charge, you’ll now need to pay 100% of the van benefit charge. However, the cash equivalent of the van benefit charge was reduced to £0 which in plain English means a BIK of £0.

Capital allowances on Electric Vehicles

‘New’ cars with CO2 emissions of less than 50g/km are also eligible for 100% first-year capital allowances. This means with a new EV, you can deduct the full cost from your pre-tax profits.

On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

VAT on Electric Vehicles

Unfortunately, no change here –  you still cannot claim the VAT on the purchase of a car however, you can claim the VAT on the purchase of a van that is for business use