Do I Pay Road Tax on an Electric Car?
More and more people are buying electric cars in the UK. And there are plenty of good reasons why many car owners prefer to get electric vehicles, starting with the savings from paying very low road tax for electric cars.
Apart from being environment-friendly, electric vehicles are also more cost-efficient when it comes to running and maintaining them. Plus, there are several incentives like the plug-in van and car grants. The governments also reward these car owners with other perks to encourage more people to shift from petrol or diesel, to electric vehicles.
If you’re a current owner of an electric car (or an aspiring EV owner), you may be interested to know more about the taxes you need to pay or whether you’re exempt from them. Here are the crucial points you need to know. Let’s begin!
Vehicle Excise Duty or Car Tax
The car tax or road tax you need to pay depends on the official tail-pipe CO2 emission of your car during the first year. Beyond that, the standard rate will apply to your car. However, there are three exceptions to this.
The first is that you may be charged a premium rate for the second to the sixth year for cars that cost £40,000 or higher if they’re brand new. Alternatively, cars that run on alternative fuel such as hybrid cars, plug-in hybrids, and pure electric cars can get a £10 discount.
And lastly, for pure electric vehicles that have zero tailpipe emissions, you will be qualified for a zero car tax. Along with that, you will also be exempted from paying the premium rate.
Car Tax for a Company Car
The amount you’ll pay for company car tax will depend on the car’s official value, termed P11D, as well as the Benefit in Kind or BIK, and the tax code of the recipient. This tax is aligned to the tailpipe emissions of the car, and its rates will be calculated based on the CO2 band your vehicle sits in.
There is much encouragement from the government for businesses to adopt pure electric vehicles as well as plug-in hybrids through the reduction of BIK rates for such models. This year, pure-electric cars are rated at one per cent for their BIK. For the following years up to 2024, it will only climb to two per cent.
Companies and businesses can save a lot of money every year just by switching from diesel cars to electric vehicles. It’s definitely a wise decision for business owners to shift to electric.
Capital Allowances for Electric Vehicles
Through capital allowances, businesses can subtract the cost of any eligible expense from their yearly tax bill. The same with company car tax and vehicle excise duty, the company will be able to determine the value of their vehicles based on their CO2 emissions.
For example, plug-in hybrids and battery electric vehicles have less than 50g/km CO2 emissions. These are eligible for a hundred per cent write-down during the first year. The standard relief on cars is 18 per cent per annum. This is based on a reducing balance for vehicles that have 51 to 110 g/km CO2 emissions.
The one hundred per cent write-down shows a cost-benefit to business-owned electric vehicles worth thousands between similar models that run on diesel or petrol.
Other Car Tax Benefits for Electric Cars
Apart from the ones mentioned above, there are still other benefits and financial incentives you can enjoy by choosing an electric vehicle. Here are some of them.
- National Insurance - Since Class 1 contributions or NICs for company vehicles depend on the official figures of their CO2 emissions, employers providing plug-in hybrids or low emission electric cars to their employees pay lower National Insurance Contributions.
- Running Costs - The cost of running an electric vehicle is as low as three pence for every mile. This is based on the annual mileage of up to 10,000 per annum. You can save up to £800 every year on fuel if you switch to driving an electric car.
- ULEZ Charge - With an electric vehicle, you can access the London Ultra Low Emission Zone and save up to £12.50 daily.
- Congestion Charge - If you need to enter the London Congestion Charge Zone, you get to save £15 per day with an electric vehicle.
Bear in mind that incentives for electric cars will change in the future so do check for updates and always check for when changes will happen by looking at the .gov website for new rules, whether that is for road tax or grants for charging points!
Free Parking for Electric Vehicles
One of the most popular incentives and benefits of driving an electric car is free parking. You also get priority and dedicated spaces to park your electric vehicle. These spots are commonly located in convenient locations, too. If you’re in London and you own an electric vehicle, you can apply for a permit for free parking.
Enjoy a Better Driving Experience
Other than the tax benefits you get to enjoy from owning an electric car, you’ll also take pleasure in the different advantages you get to experience driving it.
Compared to vehicles with internal combustion engines, the electric motor gives you instant torque, providing high as well as responsive acceleration.
Electric vehicles are also known for their regenerative braking when you ease off the accelerator. This means energy is being fed back to the car’s battery, making it even more energy-efficient.
Lastly, the distribution and weight of an electric car’s batteries as well as its low centre of gravity means the car can be handled and controlled easier.
It’s more comfortable and safer to drive, too. You’re actually less likely to suffer from serious injuries if you’re driving an electric car. Tesla 3 is known to have the lowest injury probability among all cars tested.
If you’re currently an electric car owner, then you’re already enjoying these perks. If you’re someone who wants to shift from diesel or petrol to electric, now’s a good time! With so many great car finance deals available, you can take your pick among the latest models of electric vehicles.
Soon, you’ll enjoy the benefits of owning one. And while electric cars may be a bit pricier, the money you can save from all the tax benefits will make the purchase so worth it.