How To Fund Your EV Fleet

It doesn’t need to feel like a daunting task

Contract Hire? Salary Sacrifice? Finance Lease? With three distinctly different Electric Vehicle (EV) funding options to choose from, making the right decision can feel like a daunting task.

We weigh up the pros and cons of your funding options, learn more about taxable benefits and stay on top of the latest grants available to your business. When you’re ready to take your next step, our EV experts are always on hand to help you and your drivers come to an arrangement that makes perfect business sense.

Finding the right funding option for you

Contract Hire Salary sacrifice Finance lease

What’s involved – the arrangement:

  • Initial deposit + fixed monthly payments
  • Contract between 24 and 48 months
  • Hand car back at end of contract duration
  • You cover the cost of excess mileage and damage beyond reasonable wear and tear
  • Can include a service and maintenance plan

  1. The leasing company bears the risk of uncertain residual values in a relatively new second-hand market for EVs and vans.
  1. Option to include service and maintenance plans with expert EV technicians.
  1. Build the cost of a charging point into the lease – with no Benefit in Kind or Class 1a National Insurance liabilities.
  1. Electric and plug-in hybrid vehicles are 100% tax-allowable, meaning they aren’t subject to the 85% lease rental restriction.
  2. Benefit in Kind contributions are currently set at only 2% for company car drivers that opt for an EV.

  1. Potential end of contract costs (VWFS | Fleet waives damage costs up to £100 and acts per the BVRLA Fair Wear & Tear Guide).
  1. Early termination charges apply.

What’s involved – the arrangement:

  • Employee liable for deposit + fixed monthly payments
  • Payments taken from gross salary
  • Contract between 24 and 48 months
  • Hand car back at the end of contract or purchase outright
  • Save on National Insurance and Income Tax
  • Includes insurance, service, maintenance and repairs, road tax and RAC breakdown assistance

  1. Employees drive new vehicles that are fully insured, maintained and covered for breakdowns.

  1. Can help achieve Corporate Social Responsibility targets.

  1. Vehicles with CO2 emissions less than 75g/km only pay Benefit in Kind tax on the vehicle, even if the tax on the salary sacrificed would be greater – currently, all available electric and many plug-in hybrids qualify.

  1. Benefit in Kind contributions are currently set at only 2%.
  2. A typical 20% taxpayer choosing an EV with a P11D value of £30,000 would save £1,620 year-on-year compared with choosing a same-priced petrol model with CO2 emissions of 120g/km.
  3. A similar plug-in hybrid with CO2 emissions up to 50g/km and up to 29 miles range would save £900 per year.

  1. Salary sacrifice reduces gross pay, which can affect an employee’s pension.

  1. The scheme isn’t available if the sacrifice reduces your salary below minimum wage.

  1. A salary reduction could affect the employee’s access to credit like loans and mortgages.

What’s involved – the arrangement:

  • Initial rental + fixed monthly payments
  • Contract between 24 and 48 months
  • Two end of contract options depending on preference and budget
  • No end-of-contract mileage or damage charges
  • Can include a service and maintenance plan

  1. Ideal choice for businesses who may find it difficult to predict annual mileage.

  1. Option to include service and maintenance plans with expert EV technicians.

  1. Electric and plug-in hybrid vehicles are 100% tax-allowable meaning, they aren’t subject to the 85% lease rental restriction.

  1. Option to retain the vehicle at the end of the contract for a small ‘peppercorn’ rent.
  2. Benefit in Kind contributions are currently set at only 2% for company car drivers that opt for an EV.

  1. EVs are relatively new to the second-hand market, making residual values uncertain, with Finance Lease your business is bearing the risk.

Make the most of your taxable benefits

Taxable benefits: leasing

  • 100% of monthly payments are tax allowable against pre-tax profits on LCVs. For example, if a van’s lease costs were £500 a month with corporation tax at 19% FY 23/24, you can allow £1,140 a year (£6,000 x 19%).
  • Enjoy 100% first-year allowance against your corporation tax bill when you lease a vehicle via a hire purchase agreement – through a limited company. Vehicles leased under any agreement where the company doesn’t own the vehicle do not qualify.
  • Claim 50% of VAT back when there will be at least some level of personal use. This rises to 100% when it can be proved an EV or an electric commercial vehicle is used solely for business purposes.
  • Service, maintenance and repair costs are 100% tax allowable. You can also reclaim 100% of VAT.

Taxable benefits: purchasing

  • Enjoy 100% first-year allowance against your corporation tax bill when you purchase a brand-new car outright – through a limited company.
  • You’ll only pay corporation tax on the proceeds when you sell the car. This 100% allowance gives you a significant tax advantage over the traditional annual writing down allowance.
  • The new 100% full expensing for qualifying plant and machinery available until March 2026 allows companies to write off the cost of investment in one go.
  • 100% of finance agreement interest charges are tax allowable. 100% of VAT can be claimed for electric commercial vehicles if you are VAT registered.
  • Service, maintenance and repair costs are 100% tax allowable. You can also reclaim 100% of VAT.

Learn more about the latest available grants

Light Commercial Vehicle (LCV) Plug-in Van Grants

Available for LCVs listed with the HMRC scheme that emit less than 50g/km CO2 and offer an electric range of at least 60 miles. LCV Plug-in Van Grants enable you to claim up to £2,500 towards the purchase price of a new van.

Grant levels are capped based on the gross vehicle weight:

Small vans Large vans
  • Under 2,500kg Gross Vehicle Weight (GVW)
  • CO2 emissions less than 50g/km
  • Emission-free range of at least 96km (60 miles)

The grant will pay 35% of the purchase price for small vans up to £2,500. You can claim up to 1,500 plug-in van and truck grants for your business or organisation each year – with the limit resetting every year on 1 April.

  • Between 2,500kg and 4,250kg Gross Vehicle Weight (GVW)
  • CO2 emissions less than 50g/km
  • Emission-free range of at least 96km (60 miles)

The grant will pay 35% of the purchase price for these vehicles, up to £5,000. You can claim up to 1,500 plug-in van and truck grants for your business or organisation each year – with the limit resetting every year on 1 April.

The Workplace Charging Scheme

This voucher-based programme offers your business up to £350 off the purchase and installation of an electric vehicle charge point for 40 sockets.

The EV Chargepoint Grant

The EV Chargepoint Grant provides funding for 75% of the costs of buying and installing EV charge points in a UK domestic property up to a maximum of £350 (including VAT). Please note this replaces the Electric Vehicle Homecharge Scheme (EVHS) that retired in April 2022.

Unlike the previous EVHS scheme, this incentive is only available to flat owners or applicants in rented accommodation who can provide contact details for their landlord.

To qualify, an individual must own, lease, or have placed an order for a qualifying vehicle and have dedicated off-street parking at the property. To receive the funding, a customer must choose a qualifying installer, and the installer will apply for the grant on the customer’s behalf.

Customers can no longer claim two charge points if they own a second EV.

Here to help

Get under the surface of your electrification options with our net-zero consultancy service. Our experts will get closer to your business to understand your challenges and talk you through your funding, fleet management and driver support options by leveraging our well-founded framework.