With a larger range of electric vehicles now available, more businesses are considering whether to change to electric company cars or vans. So with some major tax advantages still available, is it worth switching to electric?
For directors using a company car, electric vehicles (EVs) are often the most tax-efficient option. They also have some impressive tax benefits including:
- 100% first-year capital allowance – it’s possible to deduct the full cost of a new EV from profits in the first year.
- Very low Benefit-in-Kind for company cars – around 3–4%; rates are much higher for petrol/diesel.
- No fuel benefit charge – if your business pays for electricity used to charge company EVs.
- VAT reclaim – possible on lease costs or business-only vehicles.
- Lower running costs – with typically less cost per mile than petrol or diesel.
Are there grants and incentives available?
It’s possible to get help installing EV chargers. The Workplace Charging Scheme offers up to £350 per charging socket for up to 40 sockets, reducing the cost of installing office charging. There are also clean air zone savings; electric vehicles can avoid or reduce fees in congestion and clean air zones.
Are there reasons not to switch?
Although the benefits are attractive there are some considerations to bear in mind if you’re thinking of adding an electric vehicle to your business:
- Higher upfront costs – EVs often cost more to buy than petrol or diesel equivalents.
- Charging challenges – EVs work best if you have charging at the office and at home, and tend to drive predictable routes. It can be more tricky if you need to frequently drive very long distances or live in an area with limited charging options.
- Policy changes – some incentives are gradually changing and EVs now attract standard vehicle tax, just like petrol/diesel cars. The government is also planning a pay-per-mile charge for EVs from 2028.
EVs are still tax-efficient, but the gap is slowly narrowing. For small businesses, switching to EVs usually makes sense if:
- You run vehicles through a limited company
- You drive more than 10,000 miles a year
- You can install charging at home or work
- You operate in cities or clean-air zones
In many cases, the best time to switch to an EV car is when you or another director is buying one as a company car or if your business is replacing fleet vans with electric versions. These scenarios offer the biggest tax savings along with reduced operating costs.