Understand the tax implications of owning and charging an electric vehicle (EV) in the UK. Learn about changes to car tax rates, VAT on charging and VAT recovery. Stay informed to make the right decisions for your EV ownership.
As the UK moves towards a more electrified future in transportation, there a bound to be a number of changes for vehicle and fuel taxation to cover the diminishing returns from diesel and petrol taxation and duties.
Currently, electric car owners do not pay anything for car tax. However, from 1 April 2025, all electric car owners will be required to pay Band B VED, with the Band A rate of £0 effectively removed.
At current car tax rates, this means an annual cost of £10 in the first year and £180 annually. Electric cars will also pay the additional £370 premium car tax rate (if the car was bought for over £40,000) in years two to six.
Electric vehicle charging points
VAT is applicable at the standard rate of 20% for electric vehicle charging services in a public place, A reduced rate of 5% applies to charging points to a residential property using less than 1,000 kilowatt-hours per month.
Sole traders, directors and employees
Sole traders who charge at home or public places for business purposes can claim the VAT incurred on the business use of the electric vehicle at the rate that VAT was charged at.
Directors and employees who charge at home for an EV for business use, cannot claim VAT, as the electricity supply is considered to be made to the individual and not the business.
Tax on installation costs
Businesses may potentially claim 100% of the installation costs for an EV charging point. This includes the charging point itself, and any necessary land alterations and modifications to supply electricity to the charging point.
Additionally, some of the expenditures may qualify for the new super deduction, allowing a 130% enhanced deduction of the total cost on new charge points.
Charging at the workplace
Company cars and personal cars charged at the workplace have no taxable benefit as electricity is not considered fuel for tax purposes.
(A taxable benefit in kind, also known as a taxable benefit or a company benefit, refers to a non-cash perk or advantage that an employee receives from their employer in addition to their salary or wages. These benefits are provided for personal use or enjoyment and are subject to taxation.
The value of a taxable benefit in kind is calculated based on the market value of the benefit provided. The employee is required to pay tax on the assessed value of the benefit, which is then added to their taxable income. The employer may also be responsible for paying National Insurance contributions on the value of the benefit.)
Charging at home where the company provides electricity
For a company car where the employer covers the electricity costs, there is no taxable benefit in kind for charging the vehicle.
Personal Cars, even with exclusive business use, will be taxed on the total electricity costs. In cases of mixed-use, the electricity costs will be considered a taxable benefit-in-kind.
There is no deduction available for business mileage using mileage rates.
Charging at home and the employee pays electricity
In situations where the charging point is at your home and you personally bear the electricity costs, the tax implications differ based on ownership and usage.
Reimbursements made by your employer for electricity costs will not be subject to taxation for company cars for business use only.
Any reimbursements by your employer for electricity costs for a company car for business and private use will be taxed as earnings. It may be possible to claim a deduction for business miles travelled.
Reimbursements made by your employer for private use in a personally owned car are taxable. However, if the car is used exclusively for business or for a combination of business and private purposes, you may be eligible to claim a deduction for the cost of electricity related to business miles travelled.
Business from home
If you primarily operate your business from home and have installed an electric car charging point there, the workplace charging rules apply.
Electric vans
For electric vans provided by your company, there is no taxable benefit in kind, even if used for private purposes. Additionally, there is no taxable benefit on electricity costs provided.
The adoption of electric vehicles (EVs) for commercial purposes is on the rise, driven by the need for sustainable transportation solutions and the potential cost savings they offer. As the UK moves towards a greener future, businesses are increasingly exploring the benefits of incorporating EVs into their commercial fleets.
While the upfront cost of EVs may be higher than their traditional counterparts, the long-term operational expenses can be considerably lower, such as reduced fuel and maintenance costs.
Government grants and incentives, combined with the potential for lower operating expenses, make electric vehicles an attractive option for businesses seeking to optimize their budget while reducing their carbon footprint.
Commercial operators can take advantage of various charging options, Many electric vehicles now offer a range that can comfortably meet the requirements of commercial operations, reducing concerns about range anxiety.
If you want any further information on charging, visit our ultimate guide to charging blog here.
Disclaimer
The information and advice provided on this blog are of a general nature and should not be considered a substitute for professional advice tailored to your specific circumstances. We strongly recommend seeking specific professional advice before making any decisions or refraining from any actions based on the information provided.
The information presented provides an overview of relevant legislation and regulations as of the date of publication. Therefore, we do not assume any responsibility or provide any warranties if you choose to act on this advice without seeking appropriate professional guidance.
