Skip advert
Advertisement
Tips and advice

Electric company-car tax explained

A guide to electric company-car tax costs for employees and employers

Jaguar I-Pace charging

Many employers now offer electric vehicles as part of their company-car list. Whether you’re an employer looking to ‘go green’ with your fleet or an employee who has been offered access to an electric company car, you might wonder how much it will cost you in tax and how much you could save.

Advertisement - Article continues below

The government is offering significant tax breaks to encourage the adoption of electric company cars over petrol, diesel and even hybrid models. While electric company cars are exempt from VED (vehicle excise duty, also known as road tax) you still have to pay the Benefit-in-Kind (BiK) tax but the way BiK is currently structured makes electric cars by far the cheapest option.

How much does it cost to charge an EVHow much does it cost to charge an electric car?

What is BiK tax and how does it work for an electric company car?

BiK is a form of taxation that's applied to any company car offered by an employer as a benefit. Company-car tax is payable by both the employer and employee. The amount is calculated depending on the car’s value, CO2 emissions and income-tax bracket of the employee.

For the 2023/2024 financial year, the BiK tax rate on zero-emission company cars is set at 2%, and will remain at this level until the 2025/2026 financial year when it rises to 3%. In the following two financial years, it will go up by a further percentage point each year.

How much does the company pay in tax?

The company must pay tax based on a combination of the P11D (HMRC’s valuation of the car, including VAT and delivery fees) and how much CO2 the car emits.

How much does the employee pay in tax?

The employee must pay a tax based on the following equation: (P11D value) x (BiK band) x (income-tax bracket). You can use the government’s company car tax calculator to work out how much you’d have to pay.

nissan leaf hatchback rear cornering

The Nissan Leaf Tekna is an example of a model you might be offered as an electric company car. Its P11D value is £31,940. The BiK for this car, as determined by the government, is 2% of the P11D value for the financial year 2023/24, so the BiK value is £639. 

Advertisement - Article continues below
Skip advert
Advertisement
Skip advert
Advertisement - Article continues below

The amount the employee pays depends on their income-tax bracket. If they are a 20% taxpayer in England, they will pay £128 per year. If they pay 40% tax, they will pay £256 per year. In Scotland’s maximum 47% bracket, that goes up to £300.

By way of comparison, a typical petrol alternative, such as the Vauxhall Astra Ultimate with a 1.2-litre turbocharged engine and an automatic gearbox has a P11D value of £32,555. While its 131g/km of CO2 seems modest, this puts it into the 31% BiK bracket, for a £10,092 BiK value. This means a 20% taxpayer would be shelling out £2,018 per year, and a 40% taxpayer a whole £4,037 – so the savings for company car EV drivers can be enormous.

Is tax on an electric company van calculated the same way?

Electric vans fall under a different taxation system known as the ‘van benefit charge’. A conventionally powered van costs a flat rate of £3,960 to tax under this system but as of the 2023/2024 financial year, fully electric vans remain tax exempt.

Whether its on the company or you're after your own personal EV, check out our list of the top 10 electric cars on sale right now.

More on UK car tax...

Skip advert
Advertisement

Charlie writes and edits news, review and advice articles for Carbuyer, as well as publishing content to its social media platforms. He has also been a regular contributor to its sister titles Auto Express, DrivingElectric and evo. As well as being consumed by everything automotive, Charlie is a speaker of five languages and once lived in Chile, Siberia and the Czech Republic, returning to the UK to write about his life-long passion: cars.

Skip advert
Advertisement

Recommended

Look out, Tesla – XPeng G6 electric SUV is heading to the UK
XPeng G6 front quarter
News
8 Nov 2024

Look out, Tesla – XPeng G6 electric SUV is heading to the UK

Polestar 3 review – upmarket and well built premium SUV contender
Polestar 3 UK review
In-depth reviews
8 Nov 2024

Polestar 3 review – upmarket and well built premium SUV contender

Buy an electric Renault and get a year’s free charging – sort of…
Renault EV deal
News
7 Nov 2024

Buy an electric Renault and get a year’s free charging – sort of…

Alpine A290 review – the most fun electric hot hatch yet
Alpine A290
In-depth reviews
6 Nov 2024

Alpine A290 review – the most fun electric hot hatch yet

Most Popular

Car tax: VED rates and increases explained 2024/25
Car tax
Tips and advice
4 Nov 2024

Car tax: VED rates and increases explained 2024/25

Ford EcoBoost engines: reliability, problems and should you buy one?
Ford Puma EcoBoost front
Tips and advice
5 Nov 2024

Ford EcoBoost engines: reliability, problems and should you buy one?

2025 Kia Sportage unveiled with striking new design
2025 Kia Sportage front quarter
News
5 Nov 2024

2025 Kia Sportage unveiled with striking new design

Tips & advice

View All
Car dashboard warning lights: what does each symbol mean?
Car dashboard symbols and meanings
Tips and advice
21 Oct 2024

Car dashboard warning lights: what does each symbol mean?

Electric car charging stations: public networks, charger types, apps and maps
Charging station
Tips and advice
23 Jul 2024

Electric car charging stations: public networks, charger types, apps and maps

PCP vs HP – which type of car finance is right for you?
PCP vs HP
Tips and advice
17 May 2022

PCP vs HP – which type of car finance is right for you?

Average speed cameras: how do they work?
Average speed cameras: how do they work?
Tips and advice
21 Mar 2024

Average speed cameras: how do they work?

Best cars

View All
Top 10 best car interiors
Peugeot 208 hatchback
Best cars
25 Jun 2021

Top 10 best car interiors

Top 10 best electric cars 2024
Best electric cars
Best cars
16 May 2024

Top 10 best electric cars 2024

Top 10 best cheap-to-run cars 2024
The best cheap-to-run cars 2023
Best cars
2 Jan 2024

Top 10 best cheap-to-run cars 2024

The UK's top 10 fastest hot hatchbacks 2024
Fastest hot hatchbacks hero
Best cars
2 Jan 2024

The UK's top 10 fastest hot hatchbacks 2024