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.
The government wants businesses to drive electric cars, serving up some tasty incentives:
On top of these government perks, the lower cost of recharging can save upwards of an additional £500/year.
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 |
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*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/employee | Monthly | 5 years | Lifetime (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 |
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 |
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Model | Weekly 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 |
The Plug-in Grant will slash the RRP of eligible brand new fully electric cars by £2500. To be included, vehicles must have:
Here’s the full list of eligible vehicles and to find out how to apply for the 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.
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
The more CO2 your 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 |
---|
Model | CO2 emissions (g/km CO2) |
Year 1 rate | Year 2 onwards rate |
---|---|---|---|
Volkswagen ID.3 | 0g | £0 | £0 |
Volkswagen Golf 8 Life | 123g | £180 | £155 |
Porsche Taycan | 0g | £0 | £0 |
Range Rover Standard Wheelbase | 77g | £115 | £465 |
Tesla Model S | 0g | £0 | £0 |
BMW 5 Series | 149g | £220 | £155 |
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.
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!
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!
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.
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 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:
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?
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:
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!
Let’s take a closer look at the data included in this article to see exactly how savings are made.
Average UK electricity and fuel rates:
Cost of Refuelling VS Recharging |
---|
ICE | Electric | Real-world mpg | Real-world single charge range |
Fuel cost to drive equivalent range |
Full charge cost 0 – 100 % battery Work | Public |
---|---|---|---|---|---|
Ford Fiesta | VW ID.3 58 kWh |
45 miles | 218 miles | £29 | £8 | £13 – £15 |
BMW Series 3 Saloon | Tesla Model 3 74 kWh |
52 miles | 309 miles | £35 | £10 | £19 |
Audi A8 S | Porsche Taycan 79 kWh |
33 miles | 165 miles | £28 | £11 | £21 |
Jaguar F-PACE Plug-in Hybrid |
Jaguar I-PACE 90 kWh |
39 miles | 251 miles | £38 | £13 | £23 |
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 |
Estimated Average Cost Of Public VS Home Charging |
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Battery size | Slow 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 | £8.12 | 19 | 8 / 2.5 | 1 |
74 kWh | NA *too slow for battery size |
£19.24 | £10.36 | £19.24 | £10.36 | NA | 10 / 3 | 1.5 |
79 kWh | NA *too slow for battery size |
£20.54 | £11.06 | £20.54 | £11.06 | NA | 11 / 3.5 | 1.5 |
90kWh | NA *too slow for battery size |
£23.40 | £12.60 | £23.40 | £12.60 | NA | 12 / 4 | 2 |
These VED rates will give you an idea of how much road tax your company vehicle will be charged.
VED rates for Vehicles Registered on or after 01/04/2017 (Year 1) |
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*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 |
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.
WLTP Company Vehicle BIK Rates 2020/21 & 2021/22 |
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*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 |
---|---|---|---|---|
0 | N/A | 1% | 2% | 2% |
1 – 50 | 130 + | 1% | 2% | 2% |
1 – 50 | 70 -129 | 4% | 4% | 4% |
1 – 50 | 40 – 69 | 7% | 8% | 8% |
1 – 50 | 30 – 39 | 11% | 12% | 12% |
1 – 50 | <30 | 13% | 14% | 14% |
100 – 104 | 24& | 25% | 25% | |
105 – 109 | 25% | 26% | 26% | |
110 – 114 | 26% | 27% | 27% | |
130 – 134 | 30% | 31% | 31% |
2021/22 BIK Tax and NI Contributions Tesla Model 3 VS BMW 3 Series Saloon |
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Model | Official value (P11D) | BIK rate | BIK 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 | £36,170 | 30% | £10,770 | £2,226 | £4,452 | £5,008 | £1,497 |
Tesla Model 3 | £43,435 | 1% | £434 | £87 | £174 | £195 | £59 |
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) |
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Condition | CO2 emissions (g/km) |
First year rate |
---|---|---|
New and unused | 0g fully electric | 100% first year rate allowance |
New and unused | 1g – 50glow emissions | 18% main rate allowance |
Second hand | 1g – 50glow emissions or electric | 18% main rate allowance |
New or second hand | Above 50g | 6% special rate allowance |
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