Do I pay income tax for charging my electric company car?

With more employers and employees making the most of tax reliefs by opting for electric cars, whether as a company car or through a car allowance, we’re getting a lot of questions about tax on charging vehicles and mileage. Our blog below aims to clarify any confusion about tax, reliefs and Benefit in Kind (BIK) payments.

Nickie Antley-Slater
September 6th 2023

What tax is due on Benefits in Kind for an electric company car?

Employees pay income tax on the benefit in kind (BiK) value for the provision of a company car when used for their personal use. It is calculated by HMRC based on a percentage (BiK rate) of the car’s “P11D” value, compared to just receiving an equivalent amount in pre-income tax pay.

During 2020 / 2021 the benefit in kind rate for hybrid vehicles with emissions from 1 - 50g/km and a pure electric range of over 130 miles was 0%. The electric car tax on BIK rate increased to 1% in 2021 / 2022 and is 2% in 2022 / 2023.

What tax is payable if I charge my company car at work or at home?

HMRC have recently clarified their view of the tax treatment of the reimbursement of electricity costs where employees charge their electric company cars at home. HMRC now accepts that reimbursing part of a domestic energy bill, which is used to charge a company car or van, is exempt from income tax. Their previous view was that such reimbursements were taxable. Note that the exemption will only apply provided it can be demonstrated that the electricity was used to charge the company car or van, which may be difficult to determine in practice. Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.

If an employer pays for a vehicle charging point to be installed at the home of an employee, this is not a taxable benefit in kind if the car is a company car.

If an employer allows an employee to charge their company car at a charging point at the place of work, this will not give rise to a taxable benefit in kind as electricity is not classed as fuel and therefore does not trigger a fuel benefit. However, these conditions must be met:

Electricity must be provided via a dedicated charge point
The charging facilities must be provided at or near the workplace
Charging must be available to either all employees or all the employer’s employees at a particular location.

Employee’s do not pay tax or National Insurance on the electricity used to charge the car and the employer does not have to report anything to HMRC.

It should be noted that HMRC have still not revised their view on reclaiming VAT in respect of business miles driven by an employee who has charged their car at home. Regardless of whether the vehicle is a company car or the employee’s own, the employer cannot reclaim the VAT because the supply of electricity is made to the employee, not the employer.

If an employer pays to charge a car owned by you

If an employer allows an employee to charge their own car at a charging point either at or near the place of work, then no taxable benefit in kind arises. If the employer pays to charge the vehicle elsewhere and the car used for personal and or business purposes then a benefit in kind will arise although a business mileage claim can be made.

Electric company cars vs car allowance used for a personal electric car

Car allowance is money paid by your employer as part of your overall salary, so if you use this allowance towards a car that you own, and the employer pays for charging the car whether at a place of work or at home then a benefit in kind will arise and Income Tax is payable by the employee on the cost to the employer for the provision of charging.

Does a Benefit in Kind arise for using charge cards?

If an employer pays for a charge card of say £100 per year which allows employees to use local authority or public charging points, to charge their company car, this will not trigger a taxable benefit in kind.

However, if the charge card is used to charge the employees personal car, this will be a taxable benefit based on the cost to the employer.

Mileage allowance can be claimed based on the advisory electricity rate of 5p per business mile

What other grants and tax reliefs are available for having an electric car?

Government Grants

The Office for Zero Emission Vehicles (OZEV) is currently offering four grants to help fund electric cars and EV chargers:

Plug-in Car Grant (PICG) - discount when buying a brand new low-emissions car
Electric Vehicle Homecharge Scheme (EVHS) - grant contributing to the cost of charging point installation at home
Workplace Charging Scheme (WCS) - helps businesses with the upfront cost of charger installation
On-street Residential Chargepoint Scheme (ORCS) - support for local authorities looking to install on-street residential car chargers

Capital allowances

Cars with CO2 emissions of less than 50g/km are eligible for 100% first year capital allowances. This means employers can deduct the full cost from your pre-tax profits for purchasing an electric car.

On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

Vehicle tax

Often referred to it as 'road tax', 'vehicle tax' is a personal tax most car owners have to pay, depending on the carbon dioxide emissions of their car. How much you pay depends on whether you have a pure electric car, a hybrid car.

Pure electric cars. These are exempt from the vehicle tax, meaning it’s free to tax them.
Hybrid cars. They're liable to vehicle tax and you can pay anything between £0 - £135 per year depending on the levels of CO2 emissions.

VAT

There are no additional VAT reliefs for charging your electric car. If you charge it at home, you pay a standard VAT of 5%. Business electricity is charged at a standard VAT of 20%.

However, there is no fuel duty, which currently sits around 58p per litre before tax is applied.

Contact us for further support

If you’re an employer looking to provide electric company cars to your employees, and need some advice about tax, please speak to a member of our helpful Corporate & Personal Tax team in South Manchester on 0161 905 1801 or in Warrington on 01925 830 830.