Pure battery powered electric cars are exempt from Vehicle Excise Duty (VED). The rules state “the electricity must come from an external source or an electric storage battery not connected to any source of power when the vehicle is moving”.

Extended-range Hybrids, Plug in Hybrids and Petrol / Diesel Hybrids vehicle tax is based on their CO2 emission. You can use our Car Running Costs database to see the cost of taxing thousands of cars.

Tax bands for cars registered between 1 March 2001 and 31 March 2017

Petrol car (TC48) and diesel car (TC49)

*Includes cars with a CO2 figure over 225g/km but were registered before 23 March 2006.

Alternative fuel car (TC59)

*Includes cars with a CO2 figure over 225g/km but were registered before 23 March 2006.

First tax payment for cars registered from 1 April 2017

Rates for second tax payment onwards

Electric cars are very pleasant to drive compared to internal combustion engine vehicles. The major difference being that they are extremely quiet and are therefore very relaxing on the move. They also deliver power in an incredibly smooth manner, which eliminates the need for a gearbox, making the driving experience even easier.As petrol and diesel prices continue to rise and more stringent conditions come into force on vehicle emissions, motor manufacturers are being encouraged to develop alternatives to traditional internal combustion engine vehicles (ICEVs).

The maintenance of Electric vehicles (EVs) should be less than internal combustion engine vehicles, due to the lack of a gearbox and the oils and cooling fluids that are associated in ICEVs. Electric motors have far less moving parts than conventional petrol / diesel engine too. The running costs of electric vehicles are considerably less for the average commute to work or shopping trip.

Battery longevity is still a bit of an unknown area, many manufacturers are offering long warranties to reassure potential customers. Renault offers a battery-leasing scheme where you pay a monthly fee and they will guarantee the batteries performance.

The beauty of electric vehicles is that tail-pipe emissions are zero, therefore making our towns and cities more pleasant environments. However, they are not without environmental impact; the electricity used for charging has to come from somewhere! If your electricity comes from a coal fired power station, it may not be anymore CO2 efficient than a conventional diesel car.

It is envisaged that most electric vehicles will be charged overnight at home, as most journeys will be well within their range. Considerable Government funding is going into the development of a plug-in vehicle-charging infrastructure. Grants are available for domestic chargepoints, fleet operators and residential on-street charging schemes. Therefore charging EVs will become a more practical option as the UK network expands.

Capital Allowances – Ultra Low Emission Vehicles (ULEVs)

Enhanced Capital Allowances (ECAs) allow companies to write off the whole cost of an asset against taxable profits. This is available for cars with 50g/km or less. More polluting cars, those emitting up to 110g/km only qualify for 18% a year write down allowance. Over 110g/km qualify for a lower “special rate pool” writing down allowance of 8% a year.

Company Car Benefit in Kind (BIK) Taxation 2018 to 2021

Company car drivers are taxed on the ‘Benefit-in-kind’ (BIK) of their vehicle. This amount is based on the official value of the car – its retail price. Plus any extras fitted, such as leather seats, upgraded sound systems, wheels etc. A percentage of the official value of the car (‘P11D’) is calculated as income and tax accordingly. Employee’s income tax rate e.g. 20% basic rate, higher rate of 40% or even additional rate of 45%.

To encourage take-up of low emission vehicles, company car drivers who choose lower-polluting vehicles – both in CO₂ and NO_x emissions, will dramatically reduce their tax liabilities by selecting cars with lower emissions.

Diesel vehicles have a 4% diesel supplement over petrol models – imposed after the Volkswagen emissions scandal. Only diesel cars that pass the ‘Real Driving Emissions’ Step 2 (RDE2) test will not have this surcharge.

Electric vehicles have the lowest tax rates – making them more tax efficient than petrol or diesel cars. In the tax year 2020/21 this reduces to only 2% of the list price value.

From 6 April 2018 drivers must add 4% (increased from 3% at Autumn Budget 2017) to the appropriate percentage if the car is propelled solely by diesel (up to a maximum of 37%). Cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel supplement.

Government funding packages are available for the take-up of plug-in vehicles charging stations, for both private, fleet and public sector organisations. More information on the grants available can be found at the Office for Low Emission Vehicles.