An employee given a company car will pay income tax on the value of that benefit, and the employer pays National Insurance Contributions (NICs) on the same amount. That value – the Benefit in Kind – is worked out using the car’s list price multiplied by a percentage based on its carbon dioxide emissions. For a pure EV, it’s two percent. For a comparable petrol or diesel car, it’s 30 percent.
So, on a £30,000 EV, a basic rate taxpayer would be charged on just £600, which works out at £10 a month. On an equivalent petrol or diesel model, it’s £9,000 and a monthly cost of £150. Although if you’re a higher rate taxpayer, or the car’s worth more, this will go up.

Despite the recent percentage rise (it was zero percent in 2020/21 then one percent the year after), this has been a gamechanger.

NIC savings mean a company with a fleet of 900-plus cars could be more than £1.9 million a year better off.

For new zero-emission cars, there are corporation tax savings, too. They’re eligible for 100 percent first year capital allowances, meaning you can deduct the full cost from your pre-tax profits. This sits alongside corporation tax disincentives for employers to lease cars with emissions of more than 50g/km.

There’s no Vehicle Excise Duty for pure EVs and lower mileage reimbursement rates, so employers repay business travel, tax-free, at 5p a mile. They’re also exempt from road charging initiatives, like London’s Congestion Charge and Ultra Low Emission Zones.

With electricity costing less than diesel or petrol, there are big savings to be made here too, especially if your fleet clocks up considerable distances.

We’re seeing huge growth in EV salary sacrifice schemes, where employees give up part of their gross monthly salary to lease a car and are taxed on what’s left. That’s an immediate tax saving and, although there are Benefit in Kind implications, the favourable rate still applies.

Salary sacrifice lowers the cost of an EV for employees – we typically see a 30 to 50 percent saving compared with funding the same model privately.

For the employer, there are usually no costs outside of the administration, plus NIC savings and bulk buying discounts to be had. Also, as it can be offered to the entire workforce, it can accelerate adoption. The EV experience largely depends on how easy it is to charge your car, whether that’s at home, at work or via public points.

There are incentives for companies to provide home chargers and HMRC has confirmed it isn’t a benefit, so there’s no tax for employees to pay. With workplace infrastructure, there are grants that can help with installation, plus favourable tax treatments as charging at work isn’t seen as a benefit either.

To understand how much you really pay for a company EV, you need to consider the whole-life cost. That means factoring in not just the list price and insurance, but maintenance and administration, plus all the savings mentioned.

If you compare the obvious elements, EVs come out about 15 to 20 percent more expensive than a petrol or diesel alternative. But, add in the hidden costs and it can flip, with the EV becoming 15 to 20 percent cheaper.