Getting Started: Financial Support for Electric Cars

The UKGovernment provides a suite of incentives to encourage drivers to opt for an electric car, which means making the switch might not be as expensive as you think. Here's how.

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  Grant Funding for New Electric Cars
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  Financial Support for Charging Points
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  Reduced Vehicle Excise Duty
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  Renewed Incentives for Electric Company Cars
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  Other Incentives to Go Electric

The price gap between electric and combustion engine vehicles is closing, in part due to an 89% reduction in battery pack prices (per kilowatt-hour of capacity) during the last decade [1]. However, higher purchase costs are still one of the biggest barriers to electric vehicle adoption, cited by more than half (55%) of UK respondents surveyed for the latest LeasePlan Mobility Insights Report [2].

Since 2012, the UK Government has provided funding to help offset the higher cost of electric vehicle technology. The Plug-in Car Grant is administered by the Office for Zero Emission Vehicles (OZEV, formerly known as OLEV), and this funds up to 35% of the vehicle list price (including optional extras, VAT and delivery), to a maximum of £2,500 [3].

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  Emit 0g/km CO2 at the tailpipe
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  Offer an electric range of at least 70 miles
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  Have a list price of £32,000 or less

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

Drivers who own, lease or drive an electric vehicle for work could also be eligible for grant funding to install a charging point at home. The Electric Vehicle Homecharge Scheme provides up to 75% (to a maximum of £350, including VAT) towards the cost of charging equipment and installation, provided they have off-street parking [4]. However, single occupancy properties - such as houses and bungalows - are no longer eligible.

For more information about chargepoint grants, see our detailed guide:

Getting Started: An Introduction to home electric vehicle charging

HM Revenue and Customs introduced a new Vehicle Excise Duty (VED, or 'road tax') system in April 2017 [5], with discounts for cars with low CO2 emissions.

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  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.
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  The Standard Rate is paid annually. This is a flat rate of £165 for petrol or diesel cars or £155 for hybrids, regardless of CO2 emissions. Electric vehicles are exempt.
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  A £355 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.

Figures in brackets are for hybrids.

Drivers using a company-owned car for private journeys pay a monthly Benefit-in-Kind charge. This is calculated using a CO2-weighted percentage of the vehicle's list price (or P11d), and rate of income tax.

New bands, introduced in April 2020 [7], have renewed incentives for cars with CO2 emissions of 50g/km or less. This includes:

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  A tiered system for plug-in hybrids, with lower rates for models with a longer electric range
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  Ultra-low rates for electric vehicles, with 0g/km CO2 emissions, and plug-in hybrids with an electric range of 130 miles or more

Although the P11d value doesn't include the Plug-in Car Grant, these reforms usually mean company car tax for an electric car will be significantly cheaper than a petrol, diesel or even a hybrid model. Rates are frozen at 2022/23 levels until April 2025 [8], preserving electric vehicle incentives for the length of a typical lease or finance arrangement.

Some examples of monthly payments are given below:

Take a look at the online Deloitte and LeasePlan Tax Guide for a full list of company car tax bands.

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  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.
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  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.
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  Charging at Work: If your employer provides charging points, there's no Benefit-in-Kind liability for topping up while you're at work.
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  Clean Air Zones: Since 25 October 2021, only electric vehicles have been exempt from the £15 daily London Congestion Charge [9]. As cities across the country introduce clean air zones to improve air quality, going electric could be a safer option for avoiding future expense. To find out more about clean air zones, click here.
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  Free Parking: Some councils are introducing discounted parking for electric vehicles, to encourage cleaner transport. Many also include cheap or free charging.

[1] McKerracher, C. (2018). Electric Vehicle Outlook 2018 | Bloomberg New Energy Finance. [online] Available at: https://about.bnef.com/electric-vehicle-outlook/ [Accessed 29 Mar. 2022].

[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 29 Mar. 2022].

[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 29 Mar. 2022].

[4] Office for Zero Emission Vehicles. (2021). Electric Vehicle Homecharge Scheme: guidance for customers. [online] Available at: https://www.gov.uk/government/publications/customer-guidance-electric-vehicle-homecharge-scheme/electric-vehicle-homecharge-scheme-guidance-for-customers [Accessed 29 Mar. 2022].

[5] 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 29 Mar. 2022].

[6] Driver and Vehicle Licensing Agency. (2022) Rates of vehicle tax for cars, motorcycles, light goods vehicles and private light goods vehicles V149. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062988/v149-rates-of-vehicle-tax-from-1-april-2022-for-cars-motorcycles-light-goods-vehicles-and-private-light-goods-vehicles.pdf [Accessed 29 Mar. 2022].

[7] 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 29 Mar. 2022].

[8] HM Treasury (2020). Budget 2020. [online] Available at: https://www.gov.uk/government/publications/budget-2020-documents/budget-2020 [Accessed 29 Mar. 2022].

[9] TfL (n.d.). Discounts and exemptions. [online]. Available at: https://tfl.gov.uk/modes/driving/congestion-charge/discounts-and-exemptions [Accessed 29 Mar. 2022].

[Article updated 5th April 2022, original article published 1st July 2021]