1 in 6 people in the UK
already have an electric car, according to recent data and a further 1 in 5 is planning to get one. And the perks are plentiful:
- Electricity is (albeit not by as much currently) lower in cost than petrol
- It’s good for the environment
- If you receive an EV as a company vehicle then your tax liabilities on this Benefit in Kind are lower than on petrol vehicles
That third reason there is a big driver for many companies looking at electric cars for their employee perks and company owners too seeking our electric vehicles (EVs) over petrol.
But just how much tax do you pay on a company electric car in 2024? Let’s take a look.
Benefit in Kind and Company Car Tax: A Quick Explanation
For those not already familiar with Benefit in Kind Tax, here’s what you need to know.
Company car tax is a tax on the “Benefit in Kind” (BiK) that an employee is receiving with the benefit in question in this case being said company car.
When an employee is provided with a car by their employer and that car is available for personal use, the employee must pay some tax on the value of this benefit.
The amount of tax owed depends on the P11D value.
The P11D is a form that an employer must submit to HMRC outlining the value of benefits any employee receives.
For the purpose of calculating the P11D value of a car, the valuation takes into account:
- The vehicle list price
- Any optional extras (like upgraded seats or pain finishes outside the standard spec)
- Delivery Feets
- VAT
What Percentage Do You Pay in Tax on an EV?
So this is where the benefits lie. For the current tax year (2024/25) if you had even the lowest emission vehicle with no electric power (so not a hybrid but pure petrol car) you would be paying 15% tax on the P11D value each month.
This rate goes right up to a whopping 37% for vehicles with the highest emissions (over 160g/km of CO2).
But if you have an electric car, here’s how those figures look in 2024 right up to 2028.
|
Tax Rate for Zero Emission Vehicles |
| 2024/25 |
2% BIK |
| 2025/26 |
3% BIK |
| 2026/27 |
4% BIK |
| 2027/28 |
5% BIK |
In other words, you’re locked in to 2% until 2025. And then it will rise incrementally to 5%. That’s significantly lower than even hybrid vehicle counterparts.
There’s a really great company car tax calculator
here.
Some examples
So basically how much tax you pay on a company electric car depends o the value of the car and your income tax bracket.
So let’s look at some working examples.
Company Car Tax on a Kia EV6
Let’s say you get a Kia EV6 GT 424kW GT 77.4kWh 5dr AWD Auto.
| List Price of the Car |
£62,590 |
| Benefit in Kind % Charge |
2% |
| Benefit in Kind £ |
£1,252 |
| Tax Payable Per Year in 20% Bracket |
£250 |
| Tax Payable Per Year in 40% Bracket |
£501 |
In other words, if you’re in a 20% income tax bracket you will pay £250 per year in tax on a Kia EV6 (or around £20 per month).
For those in a 40% tax bracket, this is £501 per year or around £41 per month.
That’s a pretty high end vehicle. Further savings on company EV tax can be made by having a lower value car. Let’s look at another example.
Company Car tax on a Vauxhall Corsa Electric
A lower cost model, we looked at the company car tax for a Vauxhall Corsa 100kW Ultimate 50kWh 5dr Auto [11kWCh].
| List Price of the Car |
£36,480 |
| Benefit in Kind % Charge |
2% |
| Benefit in Kind £ |
£720 |
| Tax Payable Per Year in 20% Bracket |
£146 |
| Tax Payable Per Year in 40% Bracket |
£292 |
In other words, for those in the 20% bracket, tax on this vehicle could be as little as £12 per month.
Tax Savings with EVs
So clearly, there are significant savings to be had by going electric for your company car. And these savings look to be continuing for years to come.
Does it affect car hire?
If you’re leasing a vehicle (long term) for an employee, this is treated the same as if you’re buying one.
If you’re using car hire for short term hire in different cities/countries, for example (so very much “car hire” as opposed to “vehicle leasing”) then it will depend on the purpose. Car hire for the purpose of getting an employee to a business meeting or work engagement and not for personal use at all at not subject to income tax for the employee at all. If you’re using car hire to provide an employee with a car for personal use, then this is a taxable benefit. So it’s one you should speak to your accountant about if you’re unsure.
If an employee uses a
hire car with a debit card or credit card of their own and claims back costs as an expense, this is again a taxable benefit
if the car is for personal use at all – not a taxable benefit if the car is purely for work purposes.
