Blue electric car in front of building

Getting Started: Financial Incentives for Electric Fleets

Demand for electric cars is growing quickly in the UK, and there’s an increasingly broad business case for deploying them on your fleet. Find out more in our guide.

Grant Funding for New Electric Cars

The price gap between electric cars and their petrol or diesel counterparts is shrinking. A recent study by BloombergNEF and Transport & Environment predicts pricing will align across the market by 2027 [1], removing one of the biggest barriers among drivers, according to LeasePlan research [2].

However, fleets can already claim financial support to offset the higher purchase costs. The Plug-in Car Grant provides funding for up to 35% of the list price (which includes optional extras, VAT and delivery), up to a maximum of £2,500 per vehicle [3]. Administered by the government’s Office for Zero Emission Vehicles (OZEV, formerly OLEV), this can help reduce lease or purchase costs for fleet operators.

To qualify, vehicles must:

  • Emit less than 50g/km CO2 at the tailpipe
  • Offer an electric range of at least 70 miles (this currently excludes all plug-in hybrids)
  • Have a list price of £35,000 or less

A list of vehicles eligible for the Plug-in Car Grant is available here.

Similar grant funding is also available for electric vans. Take a look at our van support guide to find out more.

Tax Relief for Leasing or Buying Electric Cars

HM Revenue & Customs offers tax relief for organisations deploying electric and plug-in hybrid vehicles, which also helps to make going electric more accessible. Eligibility was tightened in April 2021, and the current rates are as follows:

  • Capital Allowances: Businesses who purchase electric cars (0g/km CO2) outright can write down 100% of the cost against pre-tax profits [4]. This is reduced to 18% for plug-in hybrids emitting between 1g/km and 50g/km CO2, and 6% for models with emissions of 51g/km or more.
  • Lease Rental Restriction: Businesses who rent or lease vehicles for 45 days or more can claim 100% of the cost against pre-tax profits, provided its CO2 emissions are 50g/km or less [5]. For other vehicles, this is reduced to 85%.

Reduced Vehicle Excise Duty

HM Revenue and Customs introduced a new Vehicle Excise Duty system in April 2017 [6], with discounts for cars with low CO2 emissions.

  • The First Year Rate is a one-off payment for new cars, included in the ‘On the Road’ price and weighted based on CO2 emissions to incentivise the most efficient models. A £10 reduction applies for hybrids, while electric vehicles are exempt.
  • The Standard Rate is paid annually. This is a flat rate of £155 for petrol or diesel cars or £145 for hybrids, regardless of CO2 emissions. Electric vehicles are exempt.
  • A £335 surcharge applies on top of the Standard Rate for cars with a list price of £40,000 or more, payable during the first five years on the road. The only exception is ‘zero-emission’ vehicles – including electric and fuel cell models.

Current rates for low-CO2 vehicles are as follows:

CO2 emissions First Year Rate Standard Rate

(list price <£40,000)

Standard Rate

(list price >£40,000)

0g/km £0 £0 £0
1-50g/km £10 (£0) £155 (£145) £490 (£480)
51-75g/km £25 (£150) £155 (£145) £490 (£480)

Figures in brackets are for hybrids.

Tax for Electric Company Cars

Employers who provide company vehicles for private journeys are liable for annual Class 1A National Insurance contributions (NICs). The amount payable is 13.8% of the taxable value of the vehicle, calculated as a percentage of its list price (or P11d) based on its CO2 emissions [7].

A reformed set of bands was introduced in April 2020, renewing incentives for vehicles emitting 50g/km or less [8]. This includes:

  • A tiered system for plug-in hybrids, with reduced rates for a longer electric range
  • Ultra-low rates for electric vehicles (0g/km CO2) and hybrids with an electric-only range of 130 miles or more

NICs will increase to 15.05% in April 2022, including a 2.5%-point levy introduced to support the NHS and social care [9]. Rates will then be frozen at 2022/23 levels until the start of April 2025 [10], which means an electric vehicle should be significantly cheaper than an equivalent petrol, diesel or hybrid car for the duration of a typical lease or finance arrangement.

Some worked examples are shown below:

2021-22  2022-23  
  P11d Rate NICs Rate NICs
Vauxhall Corsa-e SRi Nav Premium  £30,835 1%  £42.55 2%  £92.81
Vauxhall Corsa 1.2T SRi Nav Premium  £20,995 29%  £840.22 30%  £947.82
Hyundai Ioniq Electric Premium  £32,995 1%  £45.53 2%  £99.31
Skoda Octavia 2.0 TDI SE Tech 116PS DSG  £25,405 27%  £946.59 28%  £1,070.57
Jaguar I-Pace EV400 SE  £69,790 1%  £96.31 2%  £210.07
Jaguar F-Pace D200 AWD SE  £46,840 37%  £2,391.65 37%  £2,608.29

 

Take a look here for a full list of company car tax bands.

Further Incentives for Electric Fleets

  • Fuel costs: Electric vehicle ‘fuel’ costs are typically two to four times lower than a petrol or diesel equivalent, depending where they are charged. Find out more about how much an electric vehicle costs in our detailed guide, available here.
  • Maintenance: Servicing an electric vehicle takes less time and uses fewer parts than a petrol or diesel engine, which cuts servicing and maintenance costs. Regenerative braking, using the electric motor, also saves wear on the brake parts.
  • Charging at Work: The Workplace Charging Scheme provides up to 75% of the cost of charging points (including installation) for electric fleets, capped at £350 per socket [11]. Units which can charge two cars are eligible twice. More information is available in our workplace charging guide. Click here.
  • Clean Air Zones: As more cities roll out clean air zones, going electric could be a safer option for avoiding future expense. To find out more about clean air zones, click here.

REFERENCES:

[1] Bannon, E. (2021.). EVs will be cheaper than petrol cars in all segments by 2027, BNEF analysis finds. [online] Available at: https://www.transportenvironment.org/press/evs-will-be-cheaper-petrol-cars-all-segments-2027-bnef-analysis-finds [Accessed 19 Oct. 2021].

[2]. LeasePlan (2021). LeasePlan Mobility Insights Report: EVs and Sustainability Edition. [online] Available at: https://www.leaseplan.com/corporate/~/media/Files/L/Leaseplan/documents/news-articles/2021/report-mir-evs-and-sustainability.pdf [Accessed 19 Oct. 2021].

[3] Office for Zero Emission Vehicles (2021). Low-emission vehicles eligible for a plug-in grant. [online] Available at: https://www.gov.uk/plug-in-car-van-grants [Accessed 19 Oct. 2021].

[4] HM Revenue & Customs (2020). Claim capital allowances. [online] GOV.UK. Available at: https://www.gov.uk/capital-allowances/first-year-allowances.

[5] HM Revenue & Customs. (2020). Capital allowance carbon dioxide emissions thresholds for business cars, goods vehicles and equipment for gas refuelling stations from April 2021. [online] Available at: https://www.gov.uk/government/publications/capital-allowance-carbon-dioxide-emissions-thresholds-for-business-cars-goods-vehicles-and-equipment-for-gas-refuelling-stations-from-april-2021 [Accessed 19 Oct. 2021].

[6] Driver and Vehicle Licensing Agency. (2017). New vehicle tax rates from 1 April 2017. [online] Available at: https://www.gov.uk/government/news/new-vehicle-tax-rates-from-1-april-2017 [Accessed 19 Oct. 2021].

[7] Government Digital Service (2014). National Insurance rates and categories. [online] GOV.UK. Available at: https://www.gov.uk/national-insurance-rates-letters [Accessed 19 Oct. 2021].

[8] HM Revenue & Customs. (2019). Company car benefit – the appropriate percentage (480: Appendix 2). [online] Available at: https://www.gov.uk/guidance/company-car-benefit-the-appropriate-percentage-480-appendix-2 [Accessed 19 Oct. 2021].

[9] HM Revenue & Customs. (2021). Health and Social Care Levy. [online] Available at: https://www.gov.uk/government/publications/health-and-social-care-levy/health-and-social-care-levy. [Accessed 19 Oct. 2021].

[10] HM Treasury (2020). Budget 2020. [online] Available at: https://www.gov.uk/government/publications/budget-2020-documents/budget-2020 [Accessed 19 Oct. 2021].

[11] Office for Low Emission Vehicles. (2021). Workplace Charging Scheme guidance for applicants, installers and manufacturers. [online] Available at: https://www.gov.uk/government/publications/workplace-charging-scheme-guidance-for-applicants-installers-and-manufacturers [Accessed 19 Oct. 2021].

 

 

 

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