July 28, 2023
Grants and incentives
Keeping up with the ever changing grants and incentives for EV owners and businesses can be an overwhelming task so we’ve put together a detailed rundown of the latest initiatives available in the UK.
Electric Car Schemes
Here's a detailed rundown of the latest initiatives available in the UK:
- Vehicle Excise Duty (VED) Exemption: Up until April 2025, all electric vehicles are exempt from the annual VED, sometimes referred to as road tax. This can save owners of electric vehicles several hundred pounds per year, especially when compared to owners of high-emission vehicles.
- Benefit-In-Kind (BIK) Tax Rates: The BIK tax, which applies to company car users, is significantly lower for electric vehicles than for petrol or diesel cars. From 2020/2021, the BIK tax rate for fully electric vehicles is 0%, increasing to 1% in 2021/2022 and 2% in 2022/2023. A salary sacrifice/ company car scheme lets employees pay for an electric car each month from their gross salary - that's before tax and other contributions are deducted. It's the same as other salary sacrifice schemes, such as childcare, cycle to work schemes, or pension contributions.
- EV Chargepoint Grant: This grant provides funding of up to 75% towards the cost of installing electric vehicle smart charge points at domestic properties across the UK. It replaced the Electric Vehicle Homecharge Scheme (EVHS) on 1 April 2022. You can only apply for the grant if you own or manage flats, houses, apartment blocks or business premises.
- Workplace Charging Scheme (WCS): This scheme is a voucher-based system that provides support towards the upfront costs of the purchase and installation of electric vehicle charge-points for eligible businesses, charities and public sector organisations. It provides £350 per socket, for up to 40 sockets.
- Ultra Low Emission Zone (ULEZ) and Congestion Charge Exemption: Electric vehicles that meet the required emission standards are exempt from the London Congestion Charge. They also don't have to pay the ULEZ charge.
- Green Number Plates: The green number plates not only give recognition to the EV owners' contribution to reducing emissions but may also come with benefits such as cheaper parking and cost-free entry into zero-emission zones.
- Interest-Free Vehicle Loan (Scotland): In Scotland, interest-free loans of up £30,000 are being offered to help people buy used electric vehicles. These loans must be repaid over a five-year period.
These incentives and grants aim to encourage the uptake of electric vehicles in the UK, and to support the government's commitment to reduce carbon emissions and air pollution.
What’s an EV salary sacrifice scheme?
An EV salary sacrifice scheme is an agreement between an employee and their employer, where the employee agrees to give up a portion of their salary in exchange for a non-cash benefit, such as an electric vehicle (EV). The employer then leases an electric vehicle on behalf of the employee, and the cost of the lease, including maintenance and insurance, is deducted from the employee's gross salary.
The relation of this scheme to Benefit-in-Kind (BIK) tax comes from the fact that the non-cash benefits, such as company cars, are considered as income and are therefore taxable. However, the BIK tax rate for electric vehicles is significantly lower compared to vehicles powered by traditional fuels.
This lower BIK tax rate makes electric vehicles an attractive option for both employees and employers. For employees, it can be a more cost-effective way to own an EV, as the cost of the lease is deducted from their gross salary, and it reduces the amount of tax they have to pay. For employers, offering EVs as part of a salary sacrifice scheme can help to reduce their National Insurance contributions, as these are based on the employee's reduced gross salary.
Below is a list of some of the companies out there currently offering salary sacrifice schemes:
No more Plug-in Car Grant (PICG)?
This grant provided a discount of up to £2,500 off the purchase of new low-emission vehicles which cost less than £35,000. As of 14 June 2022, this grant is no longer available to new EV drivers. There are currently no future plans to bring this grant back into play.
