Are you interested in buying an electric vehicle (EV) but worried about the cost? You’re not alone. Fortunately, the UK government is offering incentives and grants to make EVs more affordable and encourage more people to switch to environmentally friendly transportation.

In this article, we’ll explore the different electric car tax benefits and other advantages that EV owners can enjoy in the UK, so you can make an informed decision about whether an EV is the right choice for you.

And remember, if you need expert advice or support, don’t hesitate to contact us.

EV Purchase Incentives in the UK

The Plug-In Car Grant

The Plug-In Car Grant is a financial incentive provided by the UK government to buyers of electric vehicles. This grant offers a discount of up to 35% off the purchase price, up to a maximum of £2,500.

Currently, only vehicles that cost less than £35,000 and emit less than 50g/km of CO2 qualify for the Plug-In Grant. This also applies to motorcycles, taxis, vans, and trucks, as well as mopeds. The grant percentage and maximum amount available for each type of vehicle are as follows:

  • 35% off the purchase cost of an electric vehicle (up to a maximum of £2,500)
  • 20% off the purchase cost of an electric motorcycle or moped (up to £1,500)
  • 20% off the purchase cost of an electric van (up to £8,000)
  • 20% off the cost of an electric taxi (up to a maximum of £7,500)

You don’t need to do anything to qualify for this grant because dealers automatically include the value of the Plug-In Car Grant in the price of your new EV.

Interest-Free Vehicle Loan

In Scotland, drivers can get a no-interest loan when switching to an electric or hybrid car. The loan can be up to £35,000 for a brand-new electric vehicle or van and up to £20,000 for a used electric vehicle, and it must be repaid over a six-year period.

In Northern Ireland, you are eligible to receive a grant of up to €5,000 for the purchase of a private vehicle and up to €3,800 for a business vehicle.

EV Tax Incentives

Vehicle Excise Duty

Most powered vehicles used on public roads and in parking lots are subject to an annual tax known as the Vehicle Excise Duty (VED), which is calculated based on the size of the engine, the year the vehicle was registered, and the amount of CO2 emissions it produces. However, the majority of EV owners are exempt from paying this tax.

Additionally, the “Premium rate” tax, which is applied to drivers whose cars are valued at over £40,000, is added on top of the regular VED and typically costs around £320 per year. Owners of pure EVs are exempt from this fee, though.

Benefit-In-Kind Tax Rates

Wondering about company car tax on electric cars? Many employers offer company cars to employees for motivation and to entice new hires. However, due to the significant increase in the Benefit-In-Kind tax rate, which must be paid if you use a car for non-work-related purposes, it has recently become less of a viable option for employees.

Fortunately, BIK rates are significantly lower for employees whose employers provide electric vehicles.

Please refer to the tax tables below, which are valid up to April 2028.

It’s worth noting that starting in April 2025, the company car tax rates for electric vehicles (EVs) will gradually increase by 1% per year for three years. Specifically, the rates will be 3% for 2025/26, 4% for 2026/27, and 5% for 2027/28.

Electric Range2022/252025/262026/272027/28
70 – 1295678
40 – 69891011
30 – 3912131415

Benefit-in-Kind Exemption

If employers offer charging stations at the workplace, there is no taxable benefit. It means that as an employee, you will not have to pay for vehicle charging.

EV Charging Incentives

The UK government is anticipating a rise in electric vehicle purchases and usage since the implementation of plug-in grant programmes and electric car tax benefits. It implies that the country must be equipped with a highly developed infrastructure of charging stations in order to handle the influx of electric vehicles. The following incentives are among them:

The Rapid Charging Fund (RCF)

The United Kingdom is currently the country with the most rapid chargers per 100 miles, making it the most practical place to live for people who travel by electric car. As the Rapid Charging Fund increases its funding to £950 million, this number will only increase.

The government wants to eliminate all current obstacles for EV users and build motorways with electrical capacity that is future-proof. If you still experience a problem with a lack of charging stations, the UK guarantees that this issue will soon be resolved.

The Electric Vehicle Homecharge Scheme

The Electric Vehicle Homecharge Scheme grants are available to drivers who are planning to buy or already own an electric vehicle. Thanks to this grant, the installation costs of an EV charger at your home can be reduced by up to 75% (capped at £350, inc. VAT).

To qualify for this grant, you must own, lease a car for longer than six months, or order a car with an off-street parking space at home. You can even apply for grants for more than one charging point if you own multiple electric vehicles.

An EHVS installer will install the point and apply the discount off the full price after approving your application.

Workplace Charging Scheme (WCS)

This programme, which is based on vouchers, can pay up to 75% of the cost of purchasing and installing EV charging stations at workplaces. The grant covers up to 40 charging points and a maximum discount of £350 per socket. Visit the official government website to apply and learn all the requirements for the grant, including a list of the information you must submit. After submitting your application, you will receive a voucher that is valid for 180 days.

On-Street Residential Chargepoint Scheme (ORCS)

This project aims to remove the barrier to using EVS if you don’t have off-street parking by installing charge points in residential streets. The programme is open to local governments and provides funding for 60% of the capital costs, including the cost of parts, engineering work, and installation costs (up to £7,500 or £13,000 if connection costs are unusually high). Email your local authority to see if they have already submitted an application through the Energy Saving Trust.

More Benefits

Green Number Plates

Recently, the UK government has started issuing special green number plates to electric car owners, which signalise that their car is emissions-free. With those, car owners can take advantage of free parking lots, use bus lanes, or drive through areas that are restricted for conventional vehicles.

No Car Fuel Benefit Charge

Electric charging is exempt from the car fuel benefit charge because electricity does not qualify as road fuel. Additionally, electricity is only subject to 5% VAT, compared to 20% VAT for combustible fuel.

Final Thoughts On Electric Car Tax Benefits

Although buying an electric car may seem pricey, it is a worthwhile investment. After adding up all the fees and charges, owning an EV may end up being even less expensive than owning a typical car. Additionally, by using an EV, you make a significant contribution to lowering emissions and reducing the greenhouse effect.

If you want to learn more or get some advice on buying an electric vehicle, contact Countplus Accountancy today. Our team is here to help you make the best decision for your needs and budget.

Leave a Reply

Profit Calculator