The Government has confirmed its intention to ban the sale of new petrol and diesel cars by 2035. For businesses, this means electric vehicles (EVs) will soon become standard.

However, waiting until change is mandatory may not be the most sensible option.

Switching to EVs now can bring financial benefits, lower running costs and present your business as forward-thinking and environmentally responsible.

Why should you make plans to move to EVs now?

Making the move early means your business is in control of how and when it transitions.

You can plan for costs, make the most of current incentives, and avoid the scramble when petrol and diesel options begin to disappear.

If your employees frequently commute in and out of cities, EVs offer immediate practical advantages. They are currently exempt from congestion charges and allowed in low-emission zones.

In terms of maintenance, EVs are generally cheaper to maintain due to their fewer moving parts.

However, the biggest savings may come from the tax system.

Tax treatment of company EVs

When employees use a company car for personal journeys, they are charged Benefit in Kind (BiK) tax. This is based partly on the amount of carbon dioxide the vehicle produces.

The rate of BiK tax a car attracts depends on whether it was registered before or after 6 April 2020.

Electric cars, which produce no emissions, are currently taxed at just three per cent, rising from two per cent in April 2025.

This is due to increase steadily over the next few years, reaching five per cent by 2027/2028.

However, this is still significantly less than most petrol and diesel models, which can carry BiK rates of 25 to 37 per cent.

These lower rates mean that both businesses and employees can reduce their tax bills if they opt to switch to electric company cars.

Some allowances apply when a business buys a new electric vehicle.

For instance, if the vehicle qualifies, it may be possible to deduct the full cost from your profits in the year of purchase.

VAT and charging infrastructure

If your company is VAT registered, and the EV is used solely for business purposes, you may be able to reclaim VAT on the purchase.

However, if the vehicle is also used for personal use, you won’t be able to recover the VAT.

Charging points may also offer relief. You can usually reclaim VAT on installation costs, and if the work is done before 5 April 2026, there’s a 100 per cent first-year capital allowance available.

This helps reduce the upfront cost of switching to an electric vehicle.

Make the switch to electric company cars

As we’ve already mentioned, there are several advantages to choosing to make the switch to electric company cars.

Waiting could mean missing out on reliefs that are unlikely to remain as generous.

If you’re considering electric company cars, it’s important to speak to an accountant before making any major decisions.

The rules can be complex, and the right advice will help you make a decision that works for your business.

Get in touch with our experts for tailored advice.