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We know that electric cars are smoother, quieter, cleaner and greener than petrol or diesel cars, and these benefits are enjoyed by the drivers of hundreds of thousands of EVs on UK roads to date.
But there are many financial benefits, too, including the UK government’s tax incentives and purchase grants offered to help the country meet its target of net zero emissions by 2050. Intended to make EVs more affordable to buy and run, they’re the carrots to the government’s sticks of higher taxes for more polluting petrol and diesel cars.
The UK’s grants and incentives have changed over time as adoption has increased. We run through the grants and incentives available with electric vehicles in 2023.
What is the Plug-in Car Grant?
The Plug-in Car Grant (PiCG) came into fruition way back in 2011. Launched by the UK government to incentivise the electric car revolution, it provided a discount of up to £5,000 off the list price of a new zero emission car. Lower discounts were offered for plug-in hybrids until around 2018, too.
The scheme was considered hugely successful by many, with the number of EVs registered in the UK increasing from less than 1,000 to several hundreds of thousands in a decade. As EVs hit the mainstream, the PiCG was gradually reduced, eventually falling to £1,500 by the end of 2021.
The Plug-in Car Grant scheme was officially ended in the UK in June 2022. The argument put forward for removing the grant was the significant increase in electric cars registered, and the subsequent drop in the price different between an EV and its petrol or diesel equivalent.
What is the Plug-in Van grant?
While the Plug-in Car Grant is no more, van drivers and businesses will be pleased to hear that the UK government still offers the Plug-in Van grant as a discount off the purchase price.
Helping to incentivise businesses into going green, the size of the Plug-in Van Grant is dependent on the size of the vehicle you are buying.
Small vans are eligible for a discount of up to £2,500. To be eligible for this the van must have a gross vehicle weight of less than 2,500kg, emit less than 50g/km of CO2 and offer a range of at least 60 miles.
Eligible vans available on Gridserve Van Leasing include:
The second category is large vans – those with a gross vehicle weight of between 2,500 and 4,250kg. Eligible vans include:
Grants for electric wheelchair accessible vehicles (WAVs)
The Plug-in Van Grant extends to those passenger vehicles that have been converted into wheelchair accessible vehicles (WAVs). The discount 35% of the purchase price, although that’s only up to a maximum of £2,500.
To be eligible, the vehicle must be converted from a passenger vehicle (sometimes known as a category M1 vehicle), be completely zero emissions with a range of at least 70 miles. The list price of the vehicles must be less than £35,000 (not including the cost of the conversion).
The vehicles that can be converted include:
- Citroen e-Berlingo / e-Spacetourer Business (M / XL)
- Nissan e-NV200 Combi (5 seater / 7 seater)
- Peugeot e-Rifter
- Vauxhall Vivaro-e Life – Combi
What about trucks?
Some trucks can be sold with a 20% discount and, just like vans, the total is dependent on size.
Small trucks, which weigh between 4,250kg and 12,000kg and have an EV range of at least 60 miles, are eligible for up to £16,000 off. For larger trucks, those over 12,000kg and often referred to as N3 vehicles, the grant is up to £25,000.
Are electric motorcycles eligible for a grant?
Although rarer than electric cars and vans, plug-in motorcycles are also eligible for a grant discount of up to £500. To qualify it must be completely emission-free, capable of at least 31 miles between charges and have a list price of less than £10,000.
Similarly, electric mopeds are eligible for a discount of up to £150. Mopeds must be zero-emission, have a range of 19 miles and a price under £10,000.
What electric vehicle tax incentives and savings are there?
Petrol, diesel and hybrid vehicles are subject to a road tax system based on CO2 emissions, known as road tax bands.
For the first-year rate these vary wildly depending on the emissions your car produces, from £10 for the year to over £2,600 for the most polluting cars. For the rest of the time you own the car, you’ll pay a standard tax rate – typically £180 a year.
What about electric vehicles, then? Well, it’s much simpler: because the CO2 emissions of all EVs are rated at zero, you don’t pay a penny in road tax whatsoever for the time you own or lease the car.
For a powerful electric saloon or SUV that might save you thousands of pounds over the course of the ownership or lease period, but even motorists on a budget will save.
Even more significantly, ICE cars are subject to a ‘premium car’ tax. This sees you pay an extra £390 a year in tax if you buy a car with a list price of more than £40,000. This charge continues for the first five years since the car was registered – but doesn’t apply to zero emission cars such as EVs. Vans are not subject to this penalty.
What about company car/Benefit-in-Kind tax?
If you’re a fleet operator or company car user you’re in luck, as electric vehicles offer the biggest savings yet.
Benefit-in-Kind (BiK) tax is payable on cars provided by employers for employees to use for both business and personal use. Classified as a benefit, the employee is required to pay a certain level of tax.
Currently this tax rate is decided by the level of CO2 emissions the vehicle emits in official (WLTP) testing. For electric vehicles the Benefit-in-Kind rate is set at 2%, and frozen at that point until 2025 when it will increase.
Hybrids are noticeably more expensive, but for pure petrol or diesel cars the rate is usually more than 10 times what an electric car user would pay.
To calculate your BiK payments you’ll need the rate applicable to the car, the car’s P11D value (its price minus VAT and registration fees) and your income tax bracket. For example:
- For an electric car with a P11D value of £30,000 and a BiK rate of 2%, run by an employee in the 20% tax bracket, that employee pays £120 a year.
- For a diesel car (a VW Golf 2.0 TDI Life DSG) valued at £29,445 that has a Benefit-in-Kind rate of 28%, run by an employee in the 20% tax bracket, that employee pays a whopping £1,649 a year.
Use our Company Car Tax Calculator to check different electric cars and compare to an equivalent non-electric car.
Vans are subject to a different type of Benefit-in-Kind tax which varies from zero payments to up to £3,430 a year, depending if the van is only used for business and commuting, or also used for private journeys. Electric vans are currently exempt from this charge.
Are there any other financial incentives to buying or leasing an electric car?
Absolutely. For one, if you live in a rental or leasehold property you are entitled to a government grant supporting the cost of a home wallbox charger. The EV chargepoint grant gives you a discount of up to 75% (capped at £350) off the cost of installation.
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You also won’t be subject to any current city congestion charges or low emission zone charges, such as London’s Congestion Charge or ULEZ. This could save you a lot of money if you plan on driving in and out of any cities regularly in the long-term.
What’s more, some councils offer further incentives to going electric, including reduced price parking permits, cheaper public parking and even access to bus lanes in certain locations. Contact your local authority to find out more about electric car incentives available.
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