The government’s Electric Car Grant (ECG) is now up and running, with more vehicle models eligible for discounts. Initially launched in July, the £650 million scheme offers savings on new electric cars priced at or below £37,000. The discount is either £3,750 or £1,500, depending on the vehicle’s sustainability and is applied directly at the point of sale, with no paperwork required from customers.
The grant aims to make electric vehicles (EVs) more affordable by reducing the upfront purchase price and narrowing the cost gap with petrol and diesel models. This is part of the government’s broader commitment to phase out the sale of new petrol and diesel cars by 2030.
From 9 August 2025, the scheme was expanded to include thirteen more EVs, bringing the total to seventeen models. Brands now on the list include Nissan, Renault, Vauxhall and Citroën, with more expected in the coming weeks as manufacturers’ applications are approved.
Alongside the £650 million in grant funding, the government is investing £4.5 billion to accelerate EV adoption, with Britain already the largest EV market in Europe in 2024 and sales up by almost a third this year. Tax Advantages of Electric Company Cars
Despite the grant, electric cars are still generally more expensive than petrol or diesel cars. However, for businesses and employees, EVs can also be worth considering because of the tax savings they bring when provided as a company car.
- Benefit-In-Kind (BIK) rates for fully electric company cars are currently much lower than for petrol or diesel vehicles. For 2025/26, the BIK rate for zero-emission cars is 3% of the car’s list price, compared to rates often exceeding 20% for conventional vehicles.
- Employers may also benefit from capital allowances - in some cases, qualifying new zero-emission cars can attract a 100% first-year allowance, meaning the full cost of the vehicle can be written off against taxable profits in the year of purchase.
- There are further potential savings on Class 1A National Insurance contributions for employers, as these are based on the BIK value.
If you would like help assessing whether an electric car purchase would benefit you or your business, please give us a call. We would be happy to help you!
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HMRC have opened a consultation, ‘Modernising the taxation of distributions and repayments of capital from companies’. They are seeking views on proposals to modernise the tax framework dealing with distributions made by companies to shareholders who are individuals or trusts.