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A 2021 guide to government incentives & grants for EVs

Here are all the government incentives and grants available to UK businesses, local authorities and individuals for charging and purchase in 2021.

Earlier this month, Boris Johnson addressed global leaders at Cop26 declaring that humanity is at ‘one minute to midnight on that doomsday clock and we need to act now’ when it comes to climate change. And proceeded to re-emphasise the UK’s commitment to ‘phase out the use of cars with hydrocarbon internal combustion engines – by 2035’ and end new sales by 2030.

Ten days into the conference 24 countries and a group of leading car manufacturers have now committed to ending the era of fossil-fuel powered vehicles, by 2040 or sooner.

The UK have been clear in their commitments to reducing harmful emissions and have already invested billions to aid the transition to electric in the transport sector – aiming to lead the world by example.

There are now over 650,000 plug-in vehicles with approx. 330,000 BEVs and 320,000 PHEVs registered in the UK. Latest sales data for September shows growth is continuing, with sales of BEVs up nearly 50% versus September 2020. And looking at the year as a whole so far – BEV sales are up almost 90% and PHEVs over 100%.

It is claimed more and more of us are on the verge of making the switch and are just looking for a final push into action. For some, the recent petrol shortage crisis did just that, with EV dealers reporting massive spikes in interest, sales and test drives. On 24th September, when news of a possible fuel shortage really gained momentum, Google search data showed an 1,600% increase in EV related online searches. The real impact of the crisis on actual sales will reveal itself in the coming weeks.

For a lot of us however, the final incentive needs to be financial. We’ve pulled together a guide on the current incentives and grants currently available for drivers, businesses, and local authorities.

Pure EVs (with list price below £40,000)Plug-in Hybrid Vehicles
Year 1 ownership£0£10-140 (depending on vehicle’s CO2 emissions)
Annual charge£0£140

Additional ‘Premium rate’ tax for all vehicles with a list price over £40,000: If a vehicle is listed at over £40,000 and registered after 31st March 2017, you are subject to an additional ‘Premium rate’ tax for the first 5 years of ownership on top of standard VED, whether your vehicle is electric or not. This currently stands at around £320 per year.

Benefit-in-kind tax for electric cars

Traditionally, employers have been able to offer company cars as an added benefit when attracting new employees. But uptake has been dwindling in recent years thanks to rising Benefit-In-Kind (BIK) tax rates – the tax an employee must pay for receiving this benefit, based on a vehicle’s fuel type, CO2 emissions and personal income tax percentage.

However if employers are to consider offering employees EVs the government has introduced considerably lower BiK rates as an incentive – a great benefit to pass onto employees.

Tax yearPure EVsLower emission vehicles
(1-50g/km emissions, 130+ mile range and registered after 6 April 2020)
Lower emission vehicles
(1-50g/km emissions, 130+ mile range, registered before 6 April 2020)
2021-221%1%1%
2022-242%2%2%

‘Clean Air Zone’ charges

Part of the UK government’s efforts to improve air quality has seen the introduction of ‘Clean Air Zones’ – some of which have charging systems in place for vehicles that don’t meet minimum emission standards.

An example of such a zone is London’s Ultra-Low Emissions Zone, in place since 2019, and now includes postcodes up to the North and South circular roads.

Other than London, at present, only Bath and Birmingham have charging CAZ plans firmly in place. Many more cities will follow in the coming years, with CAZs mandated for Derby, Nottingham and Southampton because of dire air pollution levels. Additionally, the government has singled out 23 local authorities where it expects pollution levels to become illegally high this year, with the expectation that they will review their course of action.

Research commissioned by Northgate Vehicle Hire found that more than a quarter of businesses with fleets don’t know about CAZ plans. With the UK’s current reliance on conventionally-fuelled vehicles estimated to be 300,000 HGVs and over 4,000,000 vans, this is a worrying statistic.

Find out more about Clean Air Zones and how you can prepare your business here.

Jaguar I-PaceBMW 5 Series Saloon
PoweredElectric (av UK mix) – 0cc (0 litre) EV400 S 90kWh 400PS AutoPetrol – 2998cc (3 litre)
540i xDrive M Sport Sport-Auto
P11D£60,940£52,740
CO2 Level0g/km165g/km
Current tax year
April 2021 – April 2022
BIK Rate1%37%
BIK Value£609£19,514
Tax @20%£122£3,903
Tax @40%£244£7,806
Tax @45%£274£8,781
April 2022 – April 2024
BIK Rate 2%37%
BIK Value £1,218.80£19,514
Tax @20% £122£3,903
Tax @40% £244£7,806
Tax @45% £274£8,781
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