Thinking of going electric? Now’s the time to plan.
From April 2025, significant changes are coming to the way electric vehicles (EVs) are taxed in the UK. These changes will impact both private owners and employees driving EVs via salary sacrifice schemes. At F9 Consulting Ltd, we’re here to help you navigate these shifts — and potentially save you money.
What’s Changing in Vehicle Excise Duty (VED)?
For years, pure electric vehicles enjoyed a £0 rate of Vehicle Excise Duty (VED). That’s ending in April 2025:
✅ First-year VED charge: EVs registered from 1 April 2025 will pay £10 in their first year (the first-year rate for vehicles emitting 0–50g/km CO₂).
✅ Standard rate from year two onwards: From the second year of registration, EVs will pay £195 per year (2025/26 rate) — the same as petrol or diesel cars.
✅ Expensive Car Supplement: EVs costing over £40,000 new will also become subject to the Expensive Car Supplement of £425 per year for five years, starting from the second licence.
This means running an EV will no longer be completely tax-free — though costs remain lower than for most petrol or diesel cars.
Benefit-in-Kind (BIK) Rates on Company Electric Cars
If you drive your EV through your company or a salary sacrifice scheme, the Benefit-in-Kind (BIK) tax is crucial:
- 2024/25 tax year: 2% of the vehicle’s list price (P11D value)
- 2025/26 tax year: Rising to 3%
- 2026/27 onwards: rising by 1 percentage point each year until reaching 5% by 2027/28
So while EVs remain very tax-efficient in the near term, costs will start to increase gradually over the next few years. These increases are already set in legislation, offering predictability through to 2028/29.
EVs and Salary Sacrifice – Example
Example:
You’re considering a fully electric car costing £40,000 (P11D value).
If You Use Salary Sacrifice
✅ BIK rate (2025/26): 3%
→ Taxable Benefit = £40,000 × 3% = £1,200
If you’re a basic-rate taxpayer (20%):
→ £1,200 × 20% = £240 per year
That’s only £20.00 per month in tax for the use of a brand new £40,000 electric car!
Even when factoring in:
- Standard-rate VED of £195 (from year 2 onwards)
- Possible Expensive Car Supplement if the car’s list price exceeds £40,000 (£425/year)
…it’s still often far cheaper than running a petrol or diesel vehicle via salary sacrifice. GOV.UK
If You Buy the EV Privately (No Salary Sacrifice)
If you simply buy the car yourself:
✅ There’s no BIK charge because the car is yours, not provided by an employer.
But:
- You pay for the car outright or via private finance/lease
- You cannot sacrifice salary pre-tax
- You’ll pay VED from April 2025 onwards:
- £10 first year
- £195 standard rate from year two
- Plus £425 Expensive Car Supplement if the list price exceeds £40,000
Tax-wise:
- No BIK tax to pay
- But you pay the full cost of the car from post-tax income
So for a basic-rate taxpayer:
- Earning £50,000 gross salary → taxed at 20% on most of it
- To afford a £40,000 car, you’d need to earn roughly £50,000 gross to cover both tax and the car cost
With salary sacrifice, your monthly car cost is deducted from gross salary, reducing your income tax and NIC, which is why it’s so tax-efficient.
Quick Comparison
| Particulars | Salary Sacrifice | Private Purchase |
|---|---|---|
| BIK tax (20% taxpayer) | £240/year | £0 |
| Pays full car cost? | No (via salary) | Yes (from net income) |
| VED from April 2025 | £195/year | £195/year |
| NIC savings possible? | Yes | No |
Bottom line: salary sacrifice usually works out cheaper because you avoid paying for the car entirely from taxed income and benefit from employer fleet discounts.
Are Government Grants for EVs Coming Back?
As of July 2025, the government has reintroduced grants to support private buyers of electric vehicles (EVs). This follows a drop in EV uptake and forms part of wider efforts to meet the UK’s Net Zero targets ahead of the 2035 ban on new petrol and diesel vehicles.
How much is available?
There are now two tiers of support:
- Up to £3,750 off new EVs with the cleanest manufacturing credentials (Band 1)
- Up to £1,500 off for moderately sustainable vehicles (Band 2)
To qualify, the vehicle must cost less than £37,000 and be purchased for private use (not company fleet or salary sacrifice). The grant is applied automatically at point of sale — no paperwork required from the buyer.
Who qualifies?
The scheme targets private individuals, with a focus on making EVs more accessible to working households and lower-income drivers. Vehicles must meet strict sustainability and emissions criteria. Some models from higher-polluting overseas manufacturers are excluded.
Additional funding
Alongside vehicle discounts, the government has pledged £63 million to improve access to public and home charging — particularly for properties without off-street parking, as well as public sector and community transport schemes.
While no new Plug-in Car Grant has officially returned as of July 2025, government announcements have hinted at support measures for EV adoption, especially ahead of the planned 2035 petrol/diesel ban. While this new grant isn’t branded the ‘Plug-in Car Grant’, it operates in a similar way — applied at point of sale, targeting sustainability and affordability.
At F9 Consulting Ltd, we’re monitoring this space closely and will update clients immediately if new grants or financial incentives become available. Acting quickly could save you thousands if incentives reappear.
What About People on PIP?
People receiving Personal Independence Payment (PIP) often qualify for additional motoring support, including through the Motability Scheme.
VED exemptions remain in place for disabled drivers:
- Vehicles used by disabled people who receive the higher mobility rate of PIP can still qualify for a VED exemption or a 50% reduction, depending on circumstances.
- However, the rules around expensive car supplements or BIK charges may still apply if the vehicle is provided as a company car rather than through Motability.
If you receive PIP and are considering an EV — personally or via your employer — tailored advice can ensure you don’t miss out on VED exemptions, Motability benefits, or tax reliefs.
F9 Consulting Ltd – Here to Help You Drive Smarter
At F9 Consulting Ltd, we specialise in:
✅ Personal and business tax advice
✅ Employer salary sacrifice schemes
✅ Efficient structuring of car purchases or leases
And because we work with trusted car finance partners, we can connect you to competitive EV finance deals that may save you thousands.
Talk to Us Today
Ready to plan your switch to electric — or check whether your current arrangements are still tax-efficient? Get in touch:
📞 Call us today on 01277 223278
✉️ Email: sales@f9consulting.co.uk
🌐 Visit: www.f9consulting.co.uk
