Electric and hybrid vehicles use their own dedicated mileage rates for expense claims. In this article we explain the potential tax benefits, and how to claim mileage for electric vehicles in your business.

Which mileage rates should I use for an electric or hybrid vehicle?

Working out a mileage claim for an electric vehicle can seem confusing because there are different rates and rules to apply depending on who owns the vehicle, and who drives it. We’ll explain these in more detail below but in short:

• An employee uses a company vehicle: The Advisory Fuel Rate or the Advisory Electricity Rate will apply
• The driver uses their own vehicle for a business journey: Use Mileage Allowance Payments to calculate the claim

What’s the difference between Advisory Fuel Rates and Mileage Allowance Payments?

Advisory Fuel Rates are used to calculate mileage for someone driving a company car, rather than a vehicle they own personally. Mileage Allowance Payments (MAPs) are used if the driver travels in their own personal vehicle for business.

They’re a bit different because Mileage Allowance Payments (MAPs) are designed to cover the wear and tear of using a privately-owned vehicle for a business journey, not just the fuel that goes in it. For instance, it includes wear and tear on the tyres.

Advisory Fuel Rates only need to factor in the cost of the fuel because the company already deals with the cost of wear and tear on the vehicle.

Mileage rates for employees using a company car

The mileage rate for employees who drive a company car is based on the size and type of engine in the vehicle. We’re going to emphasise that these are the rates for someone driving a company car, not their own personal vehicle.

You might need to use these rates if you reimburse an employee who has paid for fuel in a company vehicle, or to collect a payment from an employee who used company fuel for a personal trip.

The rates are ‘advisory’, so you might adjust them if you can prove the vehicle’s fuel cost per mile is more (or less!) efficient than the rate allows for.

• Advisory Fuel Rate: This applies to petrol, diesel and hybrid company cars
• Advisory Electricity Rate: Used for fully electric cars

The rates are updated on a regular basis, so it’s best to check the rates in place when the journey was made by visiting the gov.uk website. They’re updated every three months on 1st of March, June, September, and December.

Do employees pay tax if they use a company car?

Employees who use a company car for personal trips, or who are reimbursed for more than the trip actually costs, are basically receiving an extra perk alongside anything else they get paid.

This increases the value of what they receive from the company, so the value of the ‘benefit’ can become taxable. Benefits in Kind can be quite complicated, but will normally mean:

• The employee will pay tax on the value of the benefit
• The employer will make Employer’s National Insurance Contributions (NICs) on the benefit’s value

If you’re the owner and director of a limited company these extra charges might mean that owning the vehicle through the business is less tax efficient unless it’s a fully-electric vehicle.

Business mileage rates using a personal car

If you use a personal vehicle for business (or your employees use their own car for your business), the mileage rates are a bit different. This is because the expenses don’t just cover fuel, they also cover the cost of running the vehicle too.

These are known as Mileage Allowance Payments. The rates are based on the type of vehicle which is used, and how many miles per year are travelled. You might also find it useful to learn more about simplified expenses if you work from home!

Can I get a grant to buy an electric vehicle for my business?

There are grants available for some types of new (not used) electric vehicle. Rather than you applying for the grant separately, the seller will automatically include the discount in the price. A list of zero-emission vehicle grants (also known as a plug-in grant) is published on the gov.uk website.
 

Are there business grants for electric vehicle charging points?

Yes, eligible businesses, charities, and public sector bodies can apply to the Workplace Charging Scheme (WCS) for help with the initial costs of buying and installing electric vehicle charging points.

You might also be able to claim Capital Allowances for their ongoing maintenance!

How much can I get through the Workplace Charging Scheme (WCS)?

The Workplace Charging Scheme (WCS) grant will cover up to 75% of the total costs of the buying and installing charging points for electric vehicles (inclusive of VAT), up to a maximum of:

• £500 per socket
• 40 sockets across all sites per applicant. For example if your business operates across 40 different sites, you could install one socket in each

Am I eligible for a vehicle charging point grant?

The Workplace Charging Scheme (WCS) is only available to registered businesses, charities, and public sector organisations located in England, Wales, Scotland or Northern Ireland. Unfortunately, applicants in the Channel Islands and Isle of Man are not eligible.

You’ll need to prove you have dedicated off-street parking available for staff or vehicles in your fleet, either on your premises or reasonably nearby. If you don’t own the property, you’ll also need to show the landlord consents to having charging points installed.

 
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