Company car tax for electric vehicles to stay low until 2025

The Government has committed to keeping benefit-in-kind (BIK) tax rates low for company cars but only until March 2025.

The pledge is included in its roadmap to ending the sale of new diesel cars and vans by 2030 and hybrid cars and vans by 2035.

The report, Transitioning to Zero Emission Cars and Vans: 2035 delivery plan, also includes a commitment to keep the plug-in car and van grant to at least 2022/23.

The Treasury introduced a 0% BIK tax rate for pure electric company cars in 2020/21, rising to 1% for 2021/22. 

Company car tax rates had already been published up until 2024/25, with the BIK rate for zero-emission cars rising to 2% in 2022/23 and staying at that rate for the tax years 2023/24 and 2024/25. 

Zero emission cars are also exempt from vehicle excise duty (VED) until at least March 2025.

The roadmap, published by the Department for Transport (DfT), also says that companies and unincorporated businesses are eligible for enhanced capital allowances when buying a new zero emission car for business use.

This allows for 100% of the cost of the car to be written off against the taxable income of the period in which it was bought. This, it says, will also be available until March 2025.

A recent report suggested that UK fleets making the switch to EVs will continue to be the main catalyst for rapidly increasing adoption.

Cornwall Insight and PricewaterhouseCoopers', ‘Leading the charge! - a catalyst for the EV revolution' report, confirms that fleets will be a crucial component in increasing EV adoption and expects this sector to represent half of the number of all EV sales in the UK by 2030.