Beyond purchase, three financial incentives are also available which reduce EV running costs. These include Vehicle Excise Duty (aka ‘car tax’) which is zero-rated for BEVs and plug-in hybrids (with CO2 emissions of 100 g/km or less), zero-rated fuel tax (no fuel duty is added to electricity which also only attracts 5% VAT), and for drivers in the South East, EVs do not pay the London Congestion Charge as they are eligible under the Ultra-Low Emissions Discount scheme.
For a private driver with average annual mileage (around 10,000 miles), as compared to a typical small conventional car, fuel costs would be reduced by around £800, car tax reduced by around £100, and the ULED Congestion Charge discount could amount to as much as £2,000.
Businesses are also able to claim an Enhanced Capital Allowance (ECA) on battery electric and plug-in hybrid vehicles (with CO2 emissions of 75 g/km or less) if registered by a business soley for business use (excluding rental and short-term hire vehicles). To qualify, the vehicle must be brand new, and the purchase must be made before 31 March 2018.
Company car drivers also benefit from choosing ultra-low emission electric vehicles as zero-emission battery electric cars and plug-in hybrids with CO2 emissions up to 50 g/km attract the lowest BIK (benefit-in-kind) rate of 5%. While BIK rates for battery electric models and plug-in hybrids with CO2 emissions up to 50 g/km will increase to 7% in April 2016 and then 9% in April 2017, EVs will continue to attract the lowest BIK rate until at least 2020.