19th October 2023
Electric Vehicle benefit in kind
On 6 April 2020 the benefit in kind rate for electric cars was reduced to 0% in an effort for the government to support its green policy. This was increased to 1% in 2021/2022 and then 2% in 2022/2023. In November 2022 the government announced that from the 2025/2026 tax year it would raise the benefit in kind rate of electric vehicles further, as below.
- 2025/2026 = 3% Benefit in Kind
- 2026/2027 = 4% Benefit in Kind
- 2027/2028 = 5% Benefit in Kind
Electric Vehicle mileage rates
There are no fuel scale charges applied to fully electric cars. For reimbursement of mileage, the approved electricity rate for 2022/2023 is:
| 1 March 2022 – 30 November 2022 | 5 pence per mile |
| 1 December 2022 – 28 February 2023 | 8 pence per mile |
| From 1 March 2023 | 9 pence per mile |
VAT on electric cars
It is a common misconception that VAT is recoverable on the purchase of electric cars, all cars are treated the same for VAT purposes.
As a general rule, you cannot recover the VAT on the purchase unless the car:
- Is a stock in trade of a motor manufacturer or dealer.
- Is intended to be used primarily as a taxi, driving instruction car, or self-drive hire.
- Will be used exclusively for the purpose of your business and would never be made available for the private use of anyone.
HMRC guidance also states that if you lease a ‘qualifying car’ for business purposes you cannot normally recover 50% of the VAT charged. This block is to cover the private use of the car.