Electric Vehicle Guides

Electric Vehicle Tax: What You Need to Know

Everyone knows car tax is a boring but necessary part of being on the road. There are many advantages to owning an electric vehicle… but getting a little bit of a tax break is definitely up there with the top ones!

There are several tax-related benefits when it comes to EVs. OLEV (Office for Low Emission Vehicles) has outlined these on the government website but we thought we’d run you through everything you need to know here. Keep reading to find out how you can benefit.

Electric vehicle tax: you need to know this

First things first, being exempt from paying car tax does not mean you don’t have to tax your vehicle! As an electric vehicle user, your vehicle must be powered by an external source (i.e. battery) whilst it is moving to be exempt, but we’ve gone into more detail below. You should apply for tax here but you will not have to pay anything if your car meets the right criteria.

Tax benefits

Alongside being exempt from road tax, there are also a number of advantages to you in the tax system overall. It’s important to know that there are some tax benefits applicable to all ULEV (Ultra Low Emission Vehicle) users and some are only applicable to business users. ‘Business users’ refers to those who are using a company car. So, let’s start by discussing the advantages available to all drivers of ULEVs.

Applicable benefits for all ULEV users

Fuel Duty – This is a tax applied to combustible fuels. It is not applied to electricity, hence why the running costs of EVs tend to be a lot cheaper than standard combustion engine vehicles.

VED (Vehicle Excise Duty) – VED is what you might know as standard road tax. As we mentioned earlier, electric vehicles are exempt from this tax. However, please note that only zero emission vehicles with a value under £40,000 are exempt. Consult the government website for more information.

VAT (Value Added Tax) – Everyone knows about VAT, but you might not know how it affects your electric vehicle. Interestingly, the electricity you use to charge your car is only taxed with 5% VAT, opposed to the 20% standard VAT on other goods.

Applicable benefits to business users of ULEVs

CCT (Taxation of company cars) – A company car that is also an electric vehicle is charged at a lower rate for CCT. Read this guide for more information on what this means and how this might change in the future.

Provision of benefit in kind with salary sacrifice – You will see Income Tax and National Insurance advantages when your salary is reduced for the provision of a ULEV.

Fuel Benefit Charge – For both cars and vans, the fuel benefit charge does not apply as electricity is not a fuel. Plug-in hybrid cars, on the other hand, are applicable.

Van Benefit Charge – The van benefit charge for zero emissions vans will be at 20% of the main rate through 2018. This will taper at an increased rate until April 2022 when it will be equal to the main rate.

AFR (Advisory Fuel Rates) – These fuel rates can be used by petrol or diesel hybrid cars but are not applicable to battery-powered electric vehicles.

ECAs (Enhanced Capital Allowances) – If your company purchases cars with emissions of less than 75g CO2/km or ULEV charge points and infrastructure, they’ll be eligible for “100% first-year allowance.”

AMAPs (Approved Mileage Allowance Payment) – This is the same for an electric vehicle as it is for a combustion engine vehicle. Mileage Allowance Relief is also the same treatment.