Electric vehicle fleet business tax FAQs

posted on 10/07/2023
  • Overview
  • EV tax FAQs
  • How can Alphabet help?

Taxes can be puzzling at the best of times – let alone the implications for an electric vehicle (EV) fleet. Whether you’re planning to make the switch, or you already have, here’s what you need to know about EV fleet taxes.

Yes. Businesses can claim Enhanced Capital Allowances (ECAs) for electric cars and vehicles with zero CO2 emissions. This means you can deduct the full cost from your profits before tax.

BIK tax applies when an employee receives benefits from their employer on top of their salary. If a driver uses a company vehicle for private use, this is considered a 'benefit-in-kind'.

Since the tax rate is based on the vehicle's list price and official CO2 emissions, electric vehicles offer substantially lower tax rates than ICE vehicles (e.g. around 2% per year vs up to 37% respectively). The UK Government have announced the BIK rates through to April 2028.

Businesses can claim 100% first year capital allowances for electric cars and vehicles with zero CO2 emissions. You can claim subsequent year allowances at 18% through writing down allowance*, depending on the pool of CO2 emissions.

*This is subject to change by the UK Government

Yes, ‘pure electric’ vehicles are currently exempt from VED (also known as 'road tax or ‘road fund license') until April 2025, and plug-in hybrid electric vehicles (PHEVs) currently pay a reduced VED, which makes EVs an attractive choice for fleets.

Yes, businesses can usually recover some or all VAT on EV purchases or leases if the vehicles are for business use only. However specific conditions apply, so it’s best to check where your EV fleet falls within HMRC rules.

The good news is that costs related to installing and maintaining workplace charging infrastructure are eligible for capital allowances and VAT recovery. You can also claim back VAT on charging your EVs at work if it’s purely for business use. Subject to certain conditions, employer-provided charging for EVs is generally tax-exempt for employees.

The fuel benefit charge applies to employers and employees, where company vehicles are provided for private use. As PHEVs fall into one of the ultra-low car tax bands, the fuel benefit charge is calculated by electric range, CO2 emissions and fuel type, including any fuel used.

How Alphabet can help

It’s essential to have a basic understanding of taxes if you manage electric vehicles within your fleet. But you don’t have to have all the answers – that’s why we’re here to help.

Our comprehensive Tax Guide has information on the latest tax tables to help you stay informed. While our BIK Calculator makes calculating personal tax for employees who use company cars simpler. And our Glossary clarifies common fleet tax terms to support your growing understanding.

More questions?

Don’t let fleet taxation hold your business back – get in touch with our team today on 01252 976 010.

We're ready to answer your queries, help you stay compliant, minimise costs and keep your business moving.

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