What is the company car tax on electric cars?

The company car tax on electric cars is currently at a rate of 2%. The rate is also known as the benefit in kind (BIK) rate and is used to work out how much tax is payable on an electric company car.

The government is keeping the BIK rate for electric cars considerably lower than other fuel types like petrol and diesel because they are more energy efficient.

The current 2% car tax rate has been put in place until the end of the 24/25 tax year which stops on the 5 April 2025. From 6 April 2025 HMRC will increase the BIK rate for electric vehicles to:

• 3% for the 25/26 tax year
• 4% for the 26/27 tax year
• 5% for the 27/28 tax year

Up to the end of 20/21 tax year the company car tax rate for an electric car was zero.

The proposed increase in company car tax on electric cars is meaningful but still places electric company car tax way below the equivalent petrol or diesel options.

Hybrid (PHEV) company cars are not included in the electric car tax regime. They have a higher BIK rate in comparison to a fully electric car but less than either the petrol or diesel BIK rates.

How do I work out company car tax on electric cars?

The calculation to work out company car tax on an electric car is:

BIK band rate % x P11D value x your income tax bracket % = Electric company car tax value

The formula needs your P11D value which is the list price of the car including VAT minus the first year’s registration fee and vehicle tax.

Your income tax bracket is the rate at which you pay tax on your earnings which will be at 20%, 40% or 45%.

Are electric vans liable for company car tax?

If you are given an electric van by your company there is no company car tax charge. In addition there is no benefit in kind charge for using the van for personal use.

Electric company cars VED tax

The vehicle excise duty or VED for electric cars is zero until the start of the 25/26 tax year which is on 6 April 2025.

The government are introducing a new car tax on all electric cars of £165 per annum and an extra £355 premium car tax rate per year for vehicles with a list price of £40,000 or more. This could take the total VED tax for an electric company car to £520 per year.

The £355 premium car tax rate is applicable for five years only from the second year and not from the first year of registration.