May 213 min read

Electric Company Vehicle Tax Considerations in 2023/24

Electric Company Vehicle Tax Considerations for the tax year.

A significant number of employers offer company cars to their employees, particularly if their day-to-day job requires them to travel. Over the years though, the tax environment relating to company cars has changed.

This can make the idea less attractive for both employer and employee, so we look at the tax rules relating to company cars, and whether electric cars offer a more attractive proposition than their petrol or diesel rivals.

A green mat showing a car with an electric charger

Electric car financial benefits

An electric car qualifies for a 100% first year allowance (FYA) if purchased new prior to April 2025, meaning the cost of the new car is fully deductible in the period of purchase for tax purposes. There is currently a government grant available for certain electric vehicles, although this is no longer available for standard cars, van’s do fall into this category. Depending on whether they are small or large, the discount ranges from £2,500 - £5,000.

As well as being able to claim 100% for the cost of the vehicle, companies and unincorporated business can also claim 100% for the cost of buying and installing an electric vehicle charging point at your company premises and a company driver can also choose to apply for a government grant to fit an electric charge point at home.

Electric car fuel rates

Company car drivers will be taxed on use of the car for personal journeys (2% in 2024 and staying frozen until April 2025). The company car can earn the driver 4 pence per mile for business trips where the driver paid for the electricity to charge it, 3.3 pence per mile when charging from home. Where the company pays for the electric to charge the vehicle, there’s no ‘benefit in kind’ tax for the driver on fuel use for private journeys.

An electric van would qualify for 100% AIA for both companies and unincorporated businesses. Drivers of electric company vans have no tax charged on them for use of the vehicle for personal journeys.

Electric Car 2023/24 taxable benefits

Taxable benefits range from 2% for cars with zero emissions and cars with CO2 in 1-50g/km band with electric charge ranges of 130+ miles to 37% for cars giving out CO2 emissions of 160g/km+. Diesel cars that don’t meet RDE standards accrue 37% when emissions are 145g/km+.

Whereas a petrol or diesel car attracts a percentage charge of 30% or more, electric vehicles are chargeable at a much lower rate. In the current tax year, this is just 2%, and these rates are frozen until the 2024/25 tax year.

Electric Van 2023/24 taxable benefits

The taxable benefit for having private use of a zero-emission van is zero- thus taxed at 0%. No taxable benefit applies whatsoever if the van is only used for business journeys and usual commuting regardless of fuel type.

There’s a lot to think about when considering your next business car (or van) purchase, so to avoid large tax bills through not thoroughly researching your position, speak to our team of tax specialists about the most tax efficient vehicle for your business.