The UK Government 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.
- Grant Funding for New Electric Cars
- Financial Support for Charging Points
- Reduced Vehicle Excise Duty
- Renewed Incentives for Electric Company Cars
- Other Incentives to Go Electric
Grant Funding for New Electric Cars
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 . 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 .
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 .
Eligible 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 that qualify for the Plug-in Car Grant is available here.
Financial Support for Charging Points
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 .
For more information about chargepoint grants, see our detailed guide:
Reduced Vehicle Excise Duty
HM Revenue and Customs introduced a new Vehicle Excise Duty (VED, or ‘road tax’) system in April 2017 , 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. This applies to all vehicles, with no discounts for plug-in hybrid or electric 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)|
|1-50g/km||£10 (£0)||£155 (£145)||£490 (£480)|
|51-75g/km||£25 (£150)||£155 (£145)||£490 (£480)|
Figures in brackets are for hybrids.
Renewed Incentives for Electric Company Cars
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 , have renewed incentives for cars with CO2 emissions of 50g/km or less. This includes:
- A tiered system for plug-in hybrids, with lower rates for models with a longer electric range
- 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 will also be frozen at 2022/23 levels until April 2025 , preserving electric vehicle incentives for the length of a typical lease or finance arrangement.
Some examples of monthly payments are given below:
|P11d||BiK Rate||20% Taxpayer||40% Taxpayer||BiK Rate||20% Taxpayer||40% Taxpayer|
|Kia e-Niro ‘3’||£37,100.00||1%||£6.18||£12.37||2%||£12.37||£24.73|
|Kia Niro Hybrid ‘3’||£27,355.00||27%||£123.10||£246.20||28%||£127.66||£255.31|
|Volkswagen ID.3 Style 58kWh Pure||£33,665.00||1%||£5.61||£11.22||2%||£11.22||£22.44|
|Volkswagen Golf Style 1.5 eTSI 150hp DSG||£27,815.00||30%||£139.08||£278.15||31%||£143.71||£287.42|
|Tesla Model 3 Long Range AWD||£48,435.00||1%||£8.07||£16.15||2%||£16.15||£32.29|
|BMW 320d SE Pro (Sport Auto)||£37,640.00||28%||£175.65||£351.31||29%||£181.93||£363.85|
Other Incentives to Go Electric
- 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: If your employer provides charging points, there’s no Benefit-in-Kind liability for topping up while you’re at work.
- Clean Air Zones: From 25 October 2021, only electric vehicles will be exempt from the £15 daily London Congestion Charge . 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.
- Free Parking: Some councils are introducing discounted parking for electric vehicles, to encourage cleaner transport. Many also include cheap or free charging.
 McKerracher, C. (2018). Electric Vehicle Outlook 2018 | Bloomberg New Energy Finance. [online] Available at: https://about.bnef.com/electric-vehicle-outlook/ [Accessed 25 Jun. 2021].
. 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 25 Jun. 2021].
 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 25 Jun. 2021].
 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 25 Jun. 2021].
 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 25 Jun. 2021].
 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 25 Jun. 2021].
 HM Treasury (2020). Budget 2020. [online] Available at: https://www.gov.uk/government/publications/budget-2020-documents/budget-2020 [Accessed 25 Jun. 2021].
 TfL (n.d.). Discounts and exemptions. [online]. Available at: https://tfl.gov.uk/modes/driving/congestion-charge/discounts-and-exemptions [Accessed 25 Jun. 2021].