P11D/Class 1A National Insurance
To work out the calculation, you need to look at the percentage to the list price of a company car. You can work this out by the CO2 emissions of the vehicle. From April 2020 electric-only cars were subject to a multiple of 0%, however, this will increase in later tax years (as highlighted by the table below). It should be noted that there are reductions for electric hybrids depending on their electric-only range.
Percentage used in tax benefits of electric cars (registered before 6th April 2020)
| Vehicle CO2 | 2020/21 | 2021/22 | 2022/23 |
| 0g/km | 0% | 1% | 2% |
| 1-50g/km (electric range >130 miles) | 2% | 2% | 2% |
| 1-50g/km (electric range 70-129 miles) | 5% | 5% | 5% |
| 1-50g/km (electric range 40-69 miles) | 8% | 8% | 8% |
| 1-50g/km (electric range 30-39 miles) | 12% | 12% | 12% |
| 1-50g/km (electric range <30 miles) | 14% | 14% | 14% |
Percentage used in tax benefits of electric cars (registered after 6th April 2020)
| Vehicle CO2 | 2020/21 | 2021/22 | 2022/23 |
| 0g/km | 0% | 1% | 2% |
| 1-50g/km (electric range >130 miles) | 0% | 1% | 2% |
| 1-50g/km (electric range 70-129 miles) | 3% | 4% | 5% |
| 1-50g/km (electric range 40-69 miles) | 6% | 7% | 8% |
| 1-50g/km (electric range 30-39 miles) | 10% | 11% | 12% |
| 1-50g/km (electric range <30 miles) | 12% | 13% | 14% |
Electric vans
The taxable benefit for having the private use of a zero-emission van will be reduced but not nil until April 2021.
From 2020 to 2021, the electric van will be taxed at 80% of the benefit from a normal van, which currently stands at £3,490. This means the charge will be £2,792.
If the van is only used for business journeys and ordinary commuting (regardless of the type of fuel), there is no taxable benefit at all.
From April 2021, a zero-emission van will be taxed at 0% of the benefit charge so no benefit in kind charge for an electric van (regardless of use).
Electric bikes
For vehicles with two wheels, you need to distinguish between a bicycle with an electric motor and a motorbike as it impacts the tax. By definition, an electric bicycle must be pedal-assisted as well as not exceeding 15.5mph from motor-power and less than 250 watts in power from the electric motor. If it does not meet these classifications, it will count as a motorcycle.
The importance in defining between a motorcycle and an electric bike is due to tax. For instance, an electric bicycle will still qualify for the Cycle to Work Scheme, so can be provided without a P11D benefit in kind arising, as long as it follows the rule of the scheme. Whereas there are no special tax treatments for motorcycles.
Capital allowances
From the Budget 2020, the Government announced for expenditure incurred on or after 1st April 2021, the First Year Allowance (FYA) will be restricted to only new electrically propelled and zero-emission cars.
Any expenditure gained before 1st April 2021, a 100% FYA is available for a new car that is an ‘electrically-propelled car or has low CO2 emissions. In definition, an electrically propelled car is a car that is driven only by electric power. Also, it should be noted a car that has low CO2 emissions, where the emissions do not exceed 50g/km (which is normally found in a Plug-in Hybrid Electric Vehicle or PHEV).
Cars that do not qualify for a FYA are allocated to an emissions threshold. The emissions threshold is currently 110g/km which will be reduced to 50g/km on or after 1st April 2021. If the car is between the emissions threshold, it is allocated to the main rate pool (18% writing down allowance (WDA) each year) but if the expenditure on a car exceeds the threshold, it is given to the special rate pool (6% WDA).
The rules are summarised in the tables below:
Expenditure incurred before 1st April 2021
| Type of car | Emissions | Capital Allowance |
| New | Electric | 100% FYA |
| CO2 up to 50g/km | 100% FYA | |
| CO2 over 50g/km and below 110g/km | 18% WDA | |
| CO2 more than 110g/km | 6% WDA | |
| Used | CO2 up to 110g/km | 18% WDA |
| CO2 more than 110g/km | 6% WDA |
Expenditure incurred on or after 1st April 2021 (based on Budget 2020 announcement)
| Type of car | Emissions | Capital Allowance |
| New | Electric | 100% FYA |
| Zero | 100% FYA | |
| CO2 between 1g/km and 50g/km | 18% WDA | |
| CO2 more than 50g/km | 6% WDA | |
| Used | CO2 up to 50g/km | 18% WDA |
| CO2 more than 50g/km | 6% WDA |
Electric charge points and charging costs
If a business installs charging points (new or used) for electric vehicles up to 31st March 2023, it can claim a 100% FYA for all the costs, not including the electricity cost. From 6th April 2018, there is no taxable benefit for the company to provide free electricity for employees to charge their electric vehicles at the workplace.
To get this tax benefit, the charging facilities must be provided at or near the workplace, which is the same requirement that applies to tax-free workplace parking. It should be noted that the tax exemption is not valid if the employer reimburses the costs of charging the employee’s vehicle away from the workplace, including a motorway service station.
Where the employer pays for the cost of charging a company-provided electric vehicle there is no taxable fuel benefit for the driver, as electricity is not classified as a fuel for the car or van benefit regulations.
However, if the driver of the company-owned electric vehicle pays for the electricity to power it, from either their home supply or by charging at a roadside station, the employer has the option to reimburse the employee for that cost. In this instance, the employer can pay the company car driver 4p per mile used for business journeys with no tax implications. This rate only applies to company-owned electric cars, not to privately-owned vehicles.
Leased cars
There is a different meaning of lease that can impact the type of relief you can receive.
For instance, if you are renting and handing back the car in the future, it is known as an operating lease which is different from a Personal Contract Purchase (PCP). Therefore, if the car has emissions under 110g/km, you can get tax relief on all of the payments. It should be noted that from April 2021, this threshold will decrease to 50g/km, so only cars with carbon dioxide below this can claim full relief on the rental payments. However, if the car’s emissions are above 110g/km or above 50g/km after April 2021,15% is blocked, so only 85% can be claimed for income tax or corporation tax purposes.
Can you reclaim VAT on an electric vehicle?
Under the current law, an electric vehicle is still counted as a car for VAT purposes. This means that if there is any private use of the car VAT is not recoverable on purchase. However the VAT can be reclaimed if the car is used 100% for business purposes, but you may find difficulties proving this to HMRC.
Leased cars have private use of the car, then only 50% of the VAT on the leasing charge can be recovered. Only ongoing maintenance of leased car from usual partial exemption and business use tests, can you claim full VAT recovery.
Vans and motorbikes are not cars so input VAT is claimable, subject to any adjustments for partial exemption and/or non-business use (e.g.. domestic).
Privately owned electric cars
If the employee uses their electric car for business journeys, the company can pay the normal tax-free mileage allowance to the individual. This includes 45p per mile for the first 10,000 miles driven in the year, with additional business miles reimbursed at 25p per mile afterward that.
For further information, please get in touch with us at enquiries@aitaccountants.co.uk
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