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  • Mike Evans

Tax breaks for electric car owners

Updated: Feb 7

Possible tax savings on electric company cars


In 20 years the UK plans to ban the manufacture of petrol/diesel cars so the switch to an electric car is more a choice of when rather than if. There were just 3,500 electric cars registered in the UK in 2013 and now there are around 230,000 so the technology and infrastructure is rapidly developing to make owning an electric car easier and more efficient. The government is also pushing us to buy electric cars with incentives both for private owners and for employees with an electric company car. In the 2020/21 tax year, purely electric company cars will have a 0% benefit-in-kind meaning the average company car owner is likely to save £2k+ a year in tax by owning an electric car.


Why go electric?

Other than the obvious environmental benefits of running a zero-emission car and the cost benefits of not buying petrol/diesel, there are other significant benefits to driving an electric vehicle:


• If you buy a new fully electric vehicle in the UK, the government will pay £3,500 for you! (Be aware that most manufacturers list the price of the car after the government grant is deducted).


• One of the most overlooked benefits to electric cars is that they are much cheaper to maintain as there’s no engine full of moving parts that can go wrong. Batteries tend to last around 100,000 miles so you’re much less likely to get stung by an unexpected garage bill.


• If you do any driving in London, you won’t have to worry about the low emission or ultra-low emission zones and as these zones are set to be 10-20 times bigger within the next 2 years, this will have a significant impact on the cost of driving in London.



Getting an electric company car


As well as the benefits listed above, the government has agreed to reduce the benefit-in-kind to 0% for purely electric vehicles in 2020/21, 1% in 2021/22 and 2% in 2022/23 (most petrol/diesel cars are subject to 20-25%). This means that the normal £1-3k tax charge that most company cars under £50k cost each year will be reduced to almost nothing. Hybrids will also get reductions down to 2% dependent on their electric only range.


We compared the overall tax implications of buying a Tesla Model 3 vs a similarly priced Audi A5 as a company car and found that for a basic rate tax-payer you’d save over £7,000 in tax over the first 3 years. A Nissan Leaf vs a similarly priced Ford Mondeo would still save over £6,000 in tax over the first 3 years (if you bought the car after April 2020 the saving would increase by £1-2k). If you’re a higher rate tax payer, these savings are likely to be £10k+. You can compare the tax costs of cars at Go Ultra Low.



How about charging?


Most people get away with using personal charge points at home most of the time so you can charge your car overnight without any issues. The government subsidise the cost of installing a charge point at home so it could cost less than £300 with someone like Pod Point. Charging your car at home will likely cause a significant rise in your electric bill but as you’ll no longer be filling up with petrol/diesel, you should still make a substantial saving. Most electric cars use around 2-5p worth of electric per mile and depending on the size of your battery a full charge from empty at home will likely cost you £5-15.


Getting a charger at home will mean that you rarely have to use public charge points but with supermarkets and large carparks frequently adding points you shouldn’t have a problem topping up your car while away from home (there are over 16,000 public charging points in the UK. Zap Map is a useful mapping tool that can help you plan long-distance journeys or familiarise yourself with the charging points in your area. Many public charging points are free (Tesla’s usually get free charging for life) but many service stations for example charge around £6.50 for a 30 min rapid charge that will give most cars around 100 miles of power.



What options are available?


Most people still see electric cars as something in an experimental stage with only very expensive Tesla’s or a Nissan Leaf to choose from but in reality, many major car companies have a fully electric model in the UK market (there are currently 130 models available in the UK). Many new electric cars will now do 200+ miles on a single charge and come in a variety of shapes and sizes so most people can find something to fit their budget and lifestyle. Here are some of the most popular models and some basic stats:


*Prices and stats are based on manufacturer websites at Sep 19 before the government grant and at the lowest spec custom configuration.


• MG ZS EV – Starting from £28,495 with a 163 mile range this compact SUV is one of the cheapest on the market and MG are even matching the government grant for a limited time so you could get a £7k discount in total.


• Nissan Leaf – Starting from £30,495 with a 168 mile range this was the first widely adopted fully electric car to hit the UK market so it’s had plenty of testing and improvements making it one of the safer options.


• Hyundai Ionic – Starting from £32,950 with a 194 mile range this midsize car is designed for daily family life with a focus on space and comfort rather than range and performance.


• BMW i3 – Starting from £35,350 with a 182 mile range the i3 is the smallest car on this list designed for commuting rather than as a family vehicle.


• Kia E-Niro – Starting from £36,495 with a 268 mile range the E-Niro won the Which? Car of the Year in 2019 and is currently in such high demand that they’ve stopped taking orders until next year.


• Tesla Model 3 – Starting from £40,840 with a 254 mile range the new, more affordable Tesla still offers the high performance and electronic pedigree Tesla’s are known for.


• Jaguar I Pace – Starting from £64,495 with a 292 mile range the SUV from Jaguar was the bestselling purely electric car in the UK in Q1 2019 because of its high performance and typical Jaguar styling.


• Mercedes EQC – Isn’t available in the UK yet but will start at around £70-75k with a 268 mile range this Mercedes SUV will be a premium option to challenge the Tesla X in 2020.


• Audi E-Tron – Starting from £75,060 with a 241 mile range, the E-Tron is a large premium SUV with impressive performance stats.


• Tesla Model S – Starting from £80,700 with a 375 mile range Tesla’s saloon offering is widely regarded as the best overall quality electric car on the market in terms of range, performance and features.


• Tesla Model X – Starting at £86,550 with a 315 mile range, the SUV from Tesla has astonishing performance for such a big car and has more bells and whistles than anything else on the market.