This guide helps small business owners understand the financial side of electric cars, and how they may not be as costly as you think.

Table of Contents

Although internal combustion engine (ICE) cars tend to have a lower retail price (RRP), it’s electric vehicles (EV) which save businesses more money in the long-run.

When compared to their ICE counterparts, smaller EVs can save just shy of £1,000/year, and larger models closer to £1,500!

*Based on models included in this article

In this financial overview, we highlight the ins and outs of owning and running a company EV. We’ll show you that by switching to electric, you may in fact keep more money in your pockets. 

We only cover electric cars here. For a cost breakdown of electric vans, head over to our electric van guide for SMEs

Business benefits of owning an electric car

The government wants businesses to drive electric cars, serving up some tasty incentives:

  • Vehicle grant — up to £2500 discounted from vehicle RRP.
  • Charger grant — £350 discounted from charger RRP and installation (up to 40 charger sockets total).
  • Zero road tax saving at least £155/year.
  • Reduced benefit in kind tax (BIK) saving employees money.
  • Increased capital allowance on company EVs — less tax paid on profits
  • Low emission/ultra-low emission zone (LEZ and ULEZ) fee exemptions — average cost £10/day.

On top of these government perks, the lower cost of recharging can save upwards of an additional £500/year.

How much do electric cars actually cost?

Price tags may come as a shock, but for lots of models, the higher RRP is balanced out by lower running costs and tax savings. So, over their lifetime, it’s not uncommon to see electric cars cost a similar amount, if not less than their ICE equivalents. 

The table below shows the estimated costs of a common EV, the Tesla Model 3. In this scenario, the business buys the vehicle, and employees receive private use as part of an employment package. 

Not included in the table are the tax breaks which the company would also benefit from for having bought the EV outright.

For an SME paying corporate tax on, for example, £80,000 profit, buying a Tesla Model 3 would reduce taxes in the year of vehicle purchase from £15,200 to £7,600!

Tesla Model 3 Cost
*Company costs: NI contributions / Vehicle RRP / single-socket workplace charger installation / workplace recharging
*Employee costs: BIK tax / homeplace recharging / single-socket homeplace charger installation
*Maintenance not included
Company/employeeMonthly5 yearsLifetime (9 years)
Company £28
(After month of vehicle and charger purchase)
£44,730£46,114
Employee
(45% income tax band)
£40£3,395£5,338
Employee
(40% income tax band)
£39£3,305£5,149
Employee
(20% income tax band)
£31£2,870£4,366

Recharging VS refuelling

Your wallet will love you more for recharging. Plugging in the car instead of the pump is significantly cheaper, with the potential to save a staggering 64% of weekly petrol/diesel costs.

*Based on models in this article and average daily UK car mileage

And with 25000 + public charger devices around the UK, company vehicles can be recharged almost anywhere.

Weekly Savings Recharging VS Refuelling
ModelWeekly fuel / charge cost
Ford Fiesta
petrol
£18
VW ID.3
58 kWh
£5
BMW Series 3 Saloon
petrol
£18
Tesla Model 3
74 kWh
£5
Audi A8 S
diesel
£25
Porsche Taycan
79 kWh
£9
Jaguar F-PACE Plug-in Hybrid
petrol
£21
Jaguar I-PACE
90 kWh
£7

*Figures calculated assuming UK average daily car mileage applies to UK business cars
*Calculations based on average UK petrol and diesel rates August 2021 and average UK residential electricity rate £0.14 / kWh

Electric car purchase grants

Vehicle grant

The Plug-in Grant will slash the RRP of eligible brand new fully electric cars by £2500. To be included, vehicles must have:

  • RRP of no more than £35,000
  • minimum range of 70 miles.

Here’s the full list of eligible vehicles and to find out how to apply for the grant.

Workplace Charger grant

You can also apply for a Workplace Charging Scheme (WCS) discount.

The grant covers 75 percent (up to £350 per socket) of buying and installing up to 40 charger sockets across all properties of a business.

You’re eligible as long as you have a Companies House reference number, and have received less than £200,000 of state aid in the last three years.

Full WCS application and eligibility requirements can be found here.

How much does it cost to install a charge point?

This is tricky as each business is unique!

We played around with this cost-estimation tool from British Gas to get quotes on different setups for various UK locations.

Expect to pay a minimum of £1,500/socket, for a post-mounted 7kW fast-charger installed in your company carpark up to 25 meters away from the electricity source.

However, remember there is funding available through the WCS for up to 75% of costs.

*location dependant

Tax reductions and exemptions

Vehicle Excise Duty (VED)

The more COyour car pollutes, the more Vehicle Excise Duty (VED), aka road tax you pay. Fully electric cars pay zero VED, and save at least £155/year!

It’s a different story for ICE cars. Heavy VED rates apply for models that are higher polluting and/or have a brand-new value of at least £40,000

Check some of the latest rates below, and here’s the full list of vehicle excise duty tax rates.

ICE VS Electric Car VED
Registered on or after April 1st 2017
ModelCO2 emissions
(g/km CO2) 
Year 1 rateYear 2 onwards rate
Volkswagen ID.30g£0£0
Volkswagen Golf 8 Life123g£180£155
Porsche Taycan0g£0£0
Range Rover Standard Wheelbase77g£115£465
Tesla Model S0g£0£0
BMW 5 Series149g£220£155

Capital allowance

Capital allowance lets business owners deduct the value of certain expenses from taxable revenue. Company cars are included, and once again EVs are the winners!

In the year of purchase, a business which buys a brand new EV can deduct 100% of the car’s cost from taxable profits. For SMEs, this scheme works wonders as you receive the full tax benefit straight away. 

ICE models aren’t so lucky. They get an 18% main rate each year until the vehicle has been completely depreciated. This means smaller savings trickle down over a longer period of time. 

Here’s a nutshell example:

Business X and Business Y each make £60,000 of taxable profit. Business X buys a brand new Renault Zoe EV for £28,000. Business Y opts for a cheaper ICE Ford EcoSport for £21,000. 

Before buying the cars, both businesses would’ve paid £11,430 income tax

Business X deducts the full value of the Renault Zoe from taxable profits. Because of this, the Taxman only gets his hands on £3866, which balances out the vehicle’s higher RRP. 

Business Y, however, can only deduct 18% of the Ford EcoSPort’s value, slightly reducing their tax bill to £10,392

Business X saves a whopping £7,564 on tax, but also immediately begins saving on running costs thanks to cheaper recharging! 

100% first year capital allowance also applies to chargers until 31st March 2023. This means that the installation cost of a new charger unit can also be deducted from taxable income.

There is a catch, however. If a company vehicle is used outside of the business, then it’s allocated a single pool allowance rate. 

This will be either 18% or 8%, depending on CO2 emissions and the proportion of business to personal use.

National insurance / benefit in kind tax

Do you want to include a vehicle as part of an employee’s package? Well guess what? The government has a tax for that too…

You’ll pay 1A insurance (NI) contributions, and your employee will be charged benefit in kind (BIK) tax

As an employer purchasing the vehicle for a member of staff, the smart choice here is an EV. A Tesla Model 3 will cost £59 in annual NI contributions, whereas a petrol BMW Series 3 Saloon will set you back £1,497 — that’s over 90% more!

Low emissions zone fee exemptions 

Clean air zones (CAZ) fees are next on the long list of EV exemptions. 

CAZ are designated areas within cities where vehicles which do not meet certain emissions standards must pay to enter.

So far, London, Birmingham, and Bath all have them in place, with an average daily fee of £10.

Portsmouth will also introduce a CAZ in late 2021, and more cities are catching on. Driving within metropolitan areas will become a pricey affair for many ICE vehicles!

How to get an electric car for your business

Check for local charge points 

Running out of juice whilst out and about would be a disaster. Knowing about public charge point locations will help ensure that it never happens!

Zap-Map marks thousands of public charge points across the UK, and can be used to plan your journeys.

Buying an electric car 

Kill two birds with one stone by making your next company car electric. You’ll not only save your business money, but also cut carbon emissions.

With Wyre and Octopus it’s easier than ever to go electric. Their lease deals save on upfront costs, tax and maintenance, and are much cheaper than outright buying an ICE car that’s only going to spew out more carbon emissions into the atmosphere!

Wyre

Wyre makes sorting employees with a company vehicle easy. It’s a purchasing platform for 100% electric cars, and walks you through the process of selecting the best one for your needs!

Through their Salary Boost scheme, you can lease an EV at no cost to your business, as vehicle monthly fees are paid by the employee. It’s a win-win!

A sleek Renault Zoe will cost an employee just £251/month, including servicing, maintenance and repair:

  • Roadside assistance and breakdown cover
  • Tyre replacement 
  • Early contract termination protection
  • Home charger and installation

At the end of the lease period, you may also have the option to purchase the vehicle. 

So why pay and pollute more, when you can lease through Wyre?

Octopus Electric Vehicles

If you’re looking for an EV purely for business use, then Octopus has the solution. 

You’ll pay an initial rental fee, and then highly affordable monthly installments. Plans can be tailored to your business needs, with adjustable:

  • Millage
  • Initial rental period
  • Contract length

Leasing a business EV through Octopus is much cheaper than buying outright. You’ll save money by not paying the full RRP and lower EV running costs, along with improving your carbon footprint! 

Data

Let’s take a closer look at the data included in this article to see exactly how savings are made.

Recharging

Average UK electricity and fuel rates:

Cost of Refuelling VS Recharging
ICEElectricReal-world mpgReal-world
single charge range
Fuel cost to drive
equivalent range
Full charge cost
0 – 100 % battery

Work | Public
Ford FiestaVW ID.3
58 kWh
45 miles218 miles£29£8 | £13 – £15
BMW Series 3 SaloonTesla Model 3
74 kWh
52 miles309 miles£35£10 | £19
Audi A8 SPorsche Taycan
79 kWh
33 miles165 miles£28£11 | £21
Jaguar F-PACE
Plug-in Hybrid
Jaguar I-PACE
90 kWh
39 miles251 miles£38£13 | £23

*Real-world EV range estimated to be 86% of manufacturer’s WLTP stated range
*Calculations based on average UK petrol and diesel rates, average UK residential electricity rate £0.14 / kWh, and average UK public charge point prices
*Figures rounded to the nearest pound
Annual Refuel / Recharge Costs
Model Cost
Ford Fiesta £972
VW ID.3
58 kWh
£280
BMW Series 3 Saloon £972
Tesla Model 3
74 kWh
£280
Audi A8 S £1,400
Porsche Taycan
79 kWh
£504 
Jaguar F-PACE Plug-in Hybrid £1,176
Jaguar I-PACE
90 kWh
£392 

*Figures calculated using weekly savings figures
*Home/workplace charging rates
Estimated Average Cost Of Public VS Home Charging
Battery sizeSlow charger

3kW
Fast charger

7kW & 22KW
Rapid charger

50kW+
Time to full charge (hours)
0 – 100 % battery life

Charger speed
3kW | 7kW / 22kW | 50kW+
58 kWh£12.76 | £8.12£15.08 | £8.12£15.08 | £8.1219 | 8 / 2.5 | 1
74 kWhNA
*too slow for battery size
£19.24 | £10.36£19.24 | £10.36NA | 10 / 3 | 1.5
79 kWhNA
*too slow for battery size
£20.54 | £11.06£20.54 | £11.06NA | 11 / 3.5 | 1.5
90kWhNA
*too slow for battery size
£23.40 | £12.60£23.40 | £12.60NA | 12 / 4 | 2

*Battery sizes taken from VW ID.3, Tesla Model 3, Porsche Taycan, and Jaguar I-PACE

Vehicle Excise Duty (VED)

These VED rates will give you an idea of how much road tax your company vehicle will be charged. 

Full list of VED rates

VED rates for Vehicles Registered on or after 01/04/2017
(Year 1)
*Cars with a brand new list price of over £40,000 pay an additional £310 per year on top of the standard rate for five years from year 2 onwards.
CO2 emissions (g/km) Year 1 rate
RDE2 standard compliant diesel cars, petrol cars 
Year 1 rate
Non RDE2-compliant diesel cars
Year 2 rate
0£0£0£0
1 – 50£10£25£155
76 – 90£115£140£155
101 – 110£160£180£155
131 – 150£220£555£155
171 – 190£895£1,345£155
226 – 255£1,910£2,245£155
> 255£2,245£2,245£155

Benefit in kind tax

ICE cars cost both employers and employees significantly more in NI and BIK tax than electric vehicles, and some diesel/petrol models can cost over 20x more.

You can use this calculator to calculate company vehicle BIK tax.

Full list of BIK rates.

WLTP Company Vehicle BIK Rates 2020/21 & 2021/22
*Vehicles registered from April 6th 2020
*+ 4% additional BIK charge for non-compliant RDE2 standard diesel vehicles
CO2 emissions
(g/km)
Electric only range
(miles)
BIK rate 2020/2021
Petrol, diesel, hybrid, electric 
BIK rate 2021/2022
Petrol, diesel, hybrid, electric 
BIK rate 2022/2023
Petrol, diesel, hybrid, electric
0N/A1%2%2%
1 – 50130 +1%2%2%
1 – 5070 -1294%4%4%
1 – 5040 – 697%8%8%
1 – 5030 – 3911%12%12%
1 – 50<3013%14%14%
100 – 10424&25%25%
105 – 10925%26%26%
110 – 11426%27%27%
130 – 13430%31%31%

2021/22 BIK Tax and NI Contributions
Tesla Model 3 VS BMW 3 Series Saloon
ModelOfficial value (P11D)BIK rateBIK value (official value X BIK rate)BIK tax (BIK value x income tax band)
20% income tax
BIK tax (BIK value x income tax band)
40% income tax
BIK tax (BIK value x income tax band)
45% income tax
NI (BIK rate x 13.8%)
BMW 3 Series Saloon £36,17030%£10,770£2,226£4,452£5,008£1,497
Tesla Model 3£43,4351%£434£87£174£195£59

Capital allowance

This table shows the latest capital allowance rates. As you can see, 100% of an EV’s value can be deducted from taxable income straight away, unlike ICE cars.

Business Vehicle Capital Allowance
(April 2021 purchases onwards)
ConditionCO2 emissions
(g/km)
First year rate
New and unused0g fully electric 100%
first year rate allowance
New and unused1g – 50glow emissions 18%
main rate allowance
Second hand1g – 50glow emissions or electric18%
main rate allowance
New or second hand Above 50g6%
special rate allowance

Sources

Related reading

Alan Palazon
Author: Alan Palazon

Still Have Questions?

We connect you with experts to get your question answered. Submit your email and we’ll reply with introductions and information.

Electric Vans for SMEs

On average, a business van in the UK drives just 35 miles. With existing electric models able to cover well over 100 miles on a single charge, could your next company van be an electric one?

How to Avoid Common Net Zero Mistakes

Changing the way you make decisions will have far more impact than any single decision you make.

We outline the common mistakes people make to keep you on the right track with your net zero journey.

Sustainable Office Catering

Minimising the impact of our food habits, including catering, on the environment is essential in reducing our carbon footprint. In this article, we’ll go through some criteria to look out for when choosing an office caterer and give you some recommendations for the best sustainable caterers in the UK.

Greenhushing

You’ve heard of greenwashing, but what’s greenhushing? In this article, we take a look at what greenhushing means, what’s wrong with it, and how you can avoid it.

How to Profit from Net Zero

Transitioning to net zero will be a fundamental pillar of business leadership in future. There is a growing business need for individuals who understand the impact of climate change on a company’s operations, supply chains, and interdependencies with the wider economy and society at large.

What Net Zero Accreditations are There?

Amongst all the net zero certificates, memberships, pledges and badges, do you know which are the right for you and your company? We’ve put together a list of the best net zero accreditation schemes to help you decide.

Could you live with an EV if you don’t have a driveway?

If you have a concern about where to charge your electric vehicles? Especially if you are living in flats and terraced, then this article is for you. We’ve explored some alternatives available, some real world implications of owning an EV without a driveway, and what a “normal” person’s commute might look like, along with other useful findings.