Woman charging electric car

Getting Started: Financial Support for Electric Cars

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

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].

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 [4].

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

Getting Started: An Introduction to home electric vehicle charging

Reduced Vehicle Excise Duty

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.

  • 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 emissionsFirst Year RateStandard Rate (list price <£40,000)Standard Rate (list price >£40,000)
0g/km£0£0£335
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 [6], 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 [7], preserving electric vehicle incentives for the length of a typical lease or finance arrangement.

Some examples of monthly payments are given below:

 2021-222022-23 Benefit-in-Kind
 P11dBiK Rate20% Taxpayer40% TaxpayerBiK Rate20% Taxpayer40% Taxpayer
Kia e-Niro ‘3’£37,100.001%£6.18£12.372%£12.37£24.73
Kia Niro Hybrid ‘3’£27,355.0027%£123.10£246.2028%£127.66£255.31
Volkswagen ID.3 Style 58kWh Pure£33,665.001%£5.61£11.222%£11.22£22.44
Volkswagen Golf Style 1.5 eTSI 150hp DSG£27,815.0030%£139.08£278.1531%£143.71£287.42
Tesla Model 3 Long Range AWD£48,435.001%£8.07£16.152%£16.15£32.29
BMW 320d SE Pro (Sport Auto)£37,640.0028%£175.65£351.3129%£181.93£363.85

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

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 [8]. 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.

REFERENCES

[1] 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].

[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 25 Jun. 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 25 Jun. 2021].

[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 25 Jun. 2021].

[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 25 Jun. 2021].

[6] 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].

[7] HM Treasury (2020). Budget 2020. [online] Available at: https://www.gov.uk/government/publications/budget-2020-documents/budget-2020 [Accessed 25 Jun. 2021].

[8] TfL (n.d.). Discounts and exemptions. [online]. Available at: https://tfl.gov.uk/modes/driving/congestion-charge/discounts-and-exemptions [Accessed 25 Jun. 2021].

Matthew Walters

Matthew Walters

Matthew Walters is Head of Consultancy Services and Customer Value at LeasePlan UK, and has been with LeasePlan for over 14 years.

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