Electric Vehicle Tax Benefits UK: How You Can Save Money in 2025

Electric vehicle tax benefits UK are a major incentive for drivers considering the switch to EVs.

The shift towards electric vehicles (EVs) is accelerating in the UK, and understanding Electric Vehicle Tax Benefits UK can help drivers save thousands in 2025. Whether you are a private buyer or a business owner, there are significant tax savings available when purchasing an EV. Here is everything you need to know about how you can benefit in 2025.

Understanding Electric Vehicle Tax Benefits in the UK

1. Electric Vehicle Tax Benefits UK – Road Tax (VED) Savings

Current Benefit:
Fully electric vehicles (EVs) are exempt from Vehicle Excise Duty (VED), meaning there is no road tax to pay.

Future Changes:

• From April 2025, EV owners will need to pay standard road tax.
• EVs registered after April 1, 2025, that cost over £40,000 will be subject to the Expensive Car Supplement, which adds an extra charge of £410 annually for five years.

Buying an EV before 2025 allows you to maximize tax savings.

2. Benefit-in-Kind (BIK) Tax for Company Cars

For business users, EVs offer significant savings on Benefit-in-Kind (BIK) tax, which applies to company cars.

BIK Rate for EVs:

• 2020-21: 0%
• 2021-22: 1%
• 2022-23 onwards: 2% (frozen until 2025)

If you drive a company car, a lower BIK rate means you pay much less in tax compared to petrol or diesel vehicles, making EVs a highly cost-efficient option.

3. Electric Vehicle Tax Benefits UK for Businesses – Capital Allowances

How Electric Vehicle Tax Benefits UK Help Reduce Company Car Costs

For businesses purchasing electric vehicles, the UK government offers a 100% First Year Allowance (FYA).

What This Means for Businesses:

• Companies can deduct 100% of the EV’s purchase price from their taxable profits in the first year.
• This applies when buying outright or through hire purchase but does not apply to leased vehicles.

For example, if a business purchases an EV for £50,000, it can deduct the full amount from its taxable profits, reducing its corporation tax bill significantly.

This scheme provides immediate tax relief, making EVs a financially smart choice for business owners.

4. Salary Sacrifice Schemes for Employees

Employers can offer electric vehicle salary sacrifice schemes, allowing employees to lease an EV tax-efficiently.

How It Works:

• Employees sacrifice part of their salary in exchange for an EV lease.
• The reduction in salary lowers both income tax and National Insurance contributions.
• Employees pay lower Benefit-in-Kind (BIK) tax than they would for petrol or diesel cars.

This is a great option for businesses wanting to encourage sustainable commuting while saving on tax costs.

5. Grants & Incentives for EV Charging

The UK government provides grants for home and workplace EV chargers, reducing the cost of ownership.

Workplace Charging Scheme (WCS):

• Covers 75% of installation costs (up to £350 per socket, with a maximum of 40 sockets).

EV Homecharge Scheme:

• Homeowners can apply for grants of up to £350 to install a charger.

These grants make EV charging more accessible and affordable for both businesses and individuals.

Should You Buy an EV Now?

With tax incentives changing in April 2025, now is the best time to switch to an electric vehicle and take full advantage of the available savings.

Current benefits:

• No road tax
• Low Benefit-in-Kind tax for company cars
• 100% capital allowance for businesses

Future costs:

• Road tax will apply from April 2025
• Expensive Car Supplement for EVs over £40,000

By acting now, you can secure significant financial benefits before these changes take effect.

For more details, visit our Kia’s latest Electric Range  or explore the latest Kia EV models available at Todds of Campsie Kia.

Now is the best time to take advantage of electric vehicle tax benefits in the UK before upcoming changes in 2025.  Check out Whatcars Review of the All New EV3