Purchasing an electric vehicle (EV) for business purposes in the UK continues to offer significant tax advantages. The government maintains incentives supporting zero-emission transport, allowing businesses to benefit from favourable allowances, reduced tax charges and efficient operating costs.

1. Tax Reliefs When Purchasing an Electric Vehicle

First-Year Allowance (FYA) on New Electric Vehicles

A business purchasing a brand-new, fully electric vehicle can claim a full first-year tax deduction, provided the vehicle meets the zero-emission criteria and is newly manufactured.
This allowance enables the entire cost of the car to be deducted from taxable profits in the year of purchase.

Standard Capital Allowances for Used Electric Vehicles

When a used electric vehicle is purchased, the business applies standard annual writing-down allowances applicable to zero-emission cars.

2. VAT on the Purchase of an Electric Vehicle

VAT rules for EVs mirror those for other cars:

• 100% VAT recovery is only possible when the vehicle is used exclusively for business purposes with no private use whatsoever.
• No VAT recovery is available on the purchase if even minimal private use exists.

VAT on running costs and charging can be reclaimed proportionally to business use.

3. Using an Electric Vehicle Exclusively for Business Purposes

When an EV is used 100% for business:

• No Benefit in Kind (BiK) arises, as the car is not available for private use.
• The company may deduct all operating costs, including insurance, servicing, and charging.

Accurate documentation is required, such as mileage logs, tracking or internal policies confirming business-only use.

4. Benefit in Kind (BiK) for Private Use of an Electric Vehicle

If the employee or director uses the business EV privately, it becomes subject to Benefit in Kind rules.

• EVs benefit from preferential, low BiK rates, significantly lower than those for petrol or diesel cars.
• Annual rates are set by the government and are scheduled to increase gradually, though they remain attractive.

5. Reliefs and Advantages for EV Charging Infrastructure

Tax Relief on Charging Point Installation

Businesses can claim a full first-year deduction on qualifying expenditure for purchasing and installing EV charging equipment. This includes chargers installed at business premises and, in certain circumstances, at an employee’s home when used for a company vehicle.

No BiK for Workplace Charging

Employees and directors can charge their electric vehicles at the workplace without incurring a Benefit in Kind charge.

Home Charging of a Company Vehicle

If the business reimburses the electricity cost for charging a company-owned EV at home, this generally does not create a taxable benefit for the user.

6. Vehicle Excise Duty (VED) for Electric Vehicles

As of 2025, electric vehicles fall under the standard Vehicle Excise Duty structure:

• EVs are subject to annual VED rates set by the government.
• Higher-value cars may be liable for a supplementary charge.

Despite updates to the system, EVs generally incur lower VED compared to conventional vehicles.

7. Other Important Tax Rules for Electric Vehicles

Electricity as a Fuel

Electricity is not treated as road fuel, meaning no fuel scale charge applies.
Employers may reimburse charging costs using official Advisory Electricity Rates, which are reviewed periodically.

Clean Air Zones and Environmental Charges

Electric vehicles often benefit from reduced or zero charges when entering Clean Air Zones and similar local authority schemes.

Leasing an Electric Vehicle

Leasing payments are normally deductible as business expenses.
However, leased vehicles do not qualify for First-Year Allowance because ownership does not pass to the business.

Selling an Electric Vehicle Owned by the Company

When a fully expensed EV (claimed under FYA) is later sold, a balancing charge may arise if the sale value is significant, increasing taxable profits in that period.

8. Summary

Electric vehicles remain one of the most tax-efficient options for UK businesses in 2025. Key advantages include:

• favourable capital allowances,
• reduced or low Benefit in Kind charges,
• tax reliefs for charging infrastructure,
• lower running costs and compatibility with environmental goals.