Company Car Tax for electric cars

Everything you need to know about company car tax for electric cars

When looking at company cars, company car tax will play a huge factor. You don’t want to get your dream car, only to find that the amount you will have to pay in company car tax takes you up and over your budget.

Electric cars have always been divisive. But, like it or not, they are becoming more popular and it won’t be long before they’re a common sight on our roads.

One of the reasons they will become increasingly popular is because of company car tax.

In this article, we are going to be looking at everything to do with company car tax for electric cars, and which electric cars you might want to look at for your next company car.

What are the different types of electric car?

An electric car is just that, it runs on electricity. However, there are two different types of electric car that you should know about.

Firstly, you have your battery electric vehicles. These vehicles run entirely on a battery and an electric drive train. These batteries turn the vehicle’s wheels using one or more electric motors, powered by the electricity stored inside those batteries. It’s pretty much your standard electric vehicle.

Electric charging point

And secondly, there are also fuel-cell electric vehicles. These vehicles create electricity from hydrogen and oxygen. This is different from the battery electric vehicles, as the fuel-cells do not store energy. Instead, they create it. These, to some, are considered the best electric vehicles, as they only emit water and are considerably more efficient. However, there are very few fuel-cell electric vehicles on the market today as they are still in the development phases. But, cars such as the Toyota Mirai are fuel-cell vehicles.

We’ll mainly be looking at battery electric vehicles, as they are more readily available However, there’s no doubt that as soon as technology for the fuel-cell electric vehicles is properly harnessed and out of the development stages, we’ll be seeing a lot of those about too.

What are the pros and cons of electric vehicles?

As I mentioned earlier, electric vehicles are a divisive topic. To some, they’re a great innovation, to others they are the worst. So, let’s briefly look at the pros and cons before we go any further.

Some of the advantages of electric vehicles are;


  • They are good for the environment
    • Emissions from cars are one of the biggest contributors to global warming. But, electric cars emit no emissions therefore are massively better for the environment than a petrol or a diesel car.
  • They are cheap to run
    • After the initial payments, electric cars are way cheaper to run than petrol or diesel cars. Charging them at home can cost as little as 2p per mile. Plus, their servicing costs are much less because there are no oil changes or any complications with combustion engines. Although they may look complicated, electric vehicles are actually pretty simple.
  • They beat the system
    • Sort of. If your idea of beating the system is doing exactly what people want you to do. Our Government are doing all they can to encourage people to buy electric cars. These include imposing ultra-low emission zones in cities, government grants and incentives and exemption from congestion charge. These will all be of benefit to you should you choose an electric car.
  • They are exempt from the salary sacrifice changes
    • This is more related specifically to company cars, but we’ll go onto this in more detail in a little bit.
  •  They are less in company car tax
    • Again, we’ll go into this in more detail in a little bit.

There are, however, some disadvantages.

Man pushing broken down car - is an electric car worth it?
  • They are expensive initially
    • Electric cars don’t come cheap. And even the city cars are quite a bit more expensive than their petrol or diesel counterparts. Even with the government incentives, electric cars are still out of reach for quite a few people.
  • Range anxiety
    • This one is a pretty big disadvantage. However, it won’t affect everybody. Range anxiety is the fear of your vehicle running out of charge before you are either at a charging point, or your final destination. Some people will get this, and some people won’t. But, it can put people off opting for an electric vehicle.
  •  There isn’t much choice
    • Currently, there aren’t that many electric cars on the market which means choice is limited. Of course, we don’t expect this to be the case for much longer, but for now, it’s an issue.

So there are some of the pros and cons of getting an electric car. Now, let’s talk about electric cars and company car tax.

Do I have to pay company car tax for an electric car?

Yes you do, though how much you have to pay depends on when you are asking. Before April 2017, electric cars will have a 7% BIK rate. However, as per the Autumn Statement, this will increase to 9%

You can see the new company car tax rates below.

is a company car tax efficient?

Changes to salary sacrifice schemes

There are also going to be changes to the way salary sacrifice schemes are taxed. A salary sacrifice scheme is where you ‘sacrifice’ some of your salary in return for a benefit. For example, a mobile phone, a laptop or a company car.

Before, these salary sacrifice schemes were taxed very little, if at all. Now, however, the government are changing it so that salary sacrifice schemes will be taxed the same as their cash equivalent. In terms of company cars, this means that you will either be taxed as if you received the cash or the BIK rate, whichever is highest.

This, as you may have realised, unfairly targets those with low emission cars, as their BIK rates are going to be considerably lower than their cash equivalent.

However, there is some respite. Ultra-low emission vehicles will be exempt from these changes, and will be taxed as per their BIK rate. Ultra-low emission vehicles emit 75g/km of CO2 or less. This, obviously, includes electric cars.

So, if you want to be exempt from these salary sacrifice changes, then you may want to consider an electric car.

You will still have to pay company car tax, however, but that will be a small price to pay compared to how much you could end up paying should you opt for a car that is not ultra-low emissions.

What are the best electric cars for a company car?

If you are considering an electric car as your next company car, then there are a few that you can choose from. While there isn’t as much choice as there is for say, a petrol or a diesel car, there is still an electric car for everyone.

Renault Zoe

A smaller, city car, the Renault Zoe is one of the cheapest electric vehicles on the market today. It’s practical, with a 338-litre boot and easy to drive. The entry level model only has a range of 100 miles but the higher-spec models can reach up to 250 miles, thanks to a battery upgrade.

Nissan Leaf

Another smaller city car, the Nissan Leaf has slightly divisive looks, but it does the job as a small, efficient company car. It has a 370-litre boot, a range of 124 miles and is compatible with the fast chargers you see when you’re out and about.

Nissan Leaf Hatchback

Volkswagen e-Golf

We expect this to be one of the most popular electric vehicles on the market. You know you’re in safe hands with a VW, and with the e-Golf, you know that this electric car will be reliable, safe, and good to drive. It currently can only reach a range of 115 miles, but it’s expected that this will increase to a maximum of 186 miles with the new facelift.

Hyundai Ioniq

If you’re looking for something a little bit bigger and something slightly more conventional, then the Hyundai Ioniq is the car you should be looking at. It can reach up to 174 miles in one charge and can reach 0-62 in 9.9 seconds, which is pretty quick. It’s practical too, with a 350 litre boot that can expand to 1,410 with the seats down.

BMW i3

The BMW i3 is not for the faint-hearted. Or the lover of conventional styling. Yes, the BMW i3 is pretty divisive in looks, but it is a good electric car. It’s excellently built and claims a range of 195-miles. It also has great residual value, which can make up for the high initial cost.

BMW i3 hatchback

Tesla Model S

We couldn’t resist putting a Tesla on this list. Tesla already have a loyal following and people aren’t shying away from the hefty price tag, outpricing both the BMW 5 Series and the Mercedes E-Class. However, the people that want a Tesla, want a Tesla, and won’t be swayed by anything else. It even has a ‘Ludicrous Mode’ that propels you from 0-62 in 2.6 seconds. Which is, well, ludicrous.

So there you have it, hopefully this has given you an insight into not only how company car tax works on electric cars, but also more about how electric cars work, their pros and cons, and which electric cars make good company cars. For the latest electric cars available, you can check our website via our search function.

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Rachel Richardson
Latest posts by Rachel Richardson (see all)
  • 16th January 2017

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