Electric Car Tax – What’s In Store For 2025 And Beyond?

Electric car BIK rates

Traditionally, employers have been able to offer company cars as an added benefit when attracting new employees. But uptake has been dwindling over the years thanks to rising BIK tax rates. That is, 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, the government’s April 2020 tax update sparked change, with some generous tax incentives laid out for any business adding electric powered vehicles to their company fleet. The electric car tax for benefit-in-kind for pure-Evs increased to 1% in April 2021 – 2022 and then 2% from April 2022 – 2023. Lower emission vehicles (up to 50g/km, 130+ mile range) registered before 6 April 2020 had a frozen BIK rate of 2% until April 2023.

In 2025, these have changed, and the current BIK company EV rates are as below:

‘Clean Air Zone’ charges

Part of the UK government’s efforts to improve air quality has seen the introduction of ‘Clean Air Zones’. Some zones will mark out areas where initiatives are in place to reduce emissions, and others will see the introduction of new charges for vehicles that don’t meet minimum emission standards.

London launched its ULEZ in 2019, and then expanded it to all of Greater London in 2023. As of 2025, there are 14 cities with various forms of Clean Air Zones in the UK:

• Aberdeen
• Dundee
• Edinburgh
• Glasgow
• Newcastle
• York
• Bradford
• Sheffield
• Birmingham
• Oxford
• Bristol
• Bath
• London
• Portsmouth

Daily charges can be steep, and particularly high for larger vehicles. For example, London’s ULEZ currently charges £100 a day for buses, lorries and coaches at Euro 5 or below.

However, ultra-low-emission vehicles with a significant zero-emission range are often exempt from all CAZ charges.

Electric car grants & other incentives for UK businesses

In addition to 0% VED and BIK rate cuts, there are many grants and additional incentives available to businesses to help make the transition to electric possible. For example:

• A plug-in grant exists for vans, giving 20% off the cost of a qualifying low emissions vehicle, up to a maximum of £8,000.
• You can also claim 35% off the purchase price of a qualifying electric car for up to a maximum of £3,000.
• If you place one of the first 200 orders for a qualifying large van or truck, the OLEV grant will pay for 20% of the purchase price, up to a maximum of £20,000. The grant will then pay for 20% of the purchase price, up to a maximum of £8,000.
• If you choose to install one or more charging stations on your company premises, you can claim an OZEV Workplace Charging Scheme grant which gives you £350 off per charge point socket for up to 40 sockets
• The Clean Air Fund provides support to individuals and businesses (e.g. vehicle upgrades)

It’s also worth exploring the grants available via your local council authority’s website.

Fleet owners leading the way

We are starting to see meaningful commitment from several large fleet owners, notably from delivery firms including IKEA, Royal Mail, DPD, UPS and Hermes switching to EV Fleets.

Royal Mail has introduced close to 300 green-wrapped electric vehicles onto their usual delivery routes since the start of their 2018 involvement with Optimise Prime, the world’s largest commercial electric vehicle project. These were supplemented with the roll-out of another 87. Their vans can be found in parts of London and across the South East.

UPS placed an order of 10,000 new electric vans, and had the vehicles in action across the UK, Europe and North America by 2024. At the same time, DPD requested 300 Nissan e-NV200s for roll out in the UK, taking their number of EVs on the road to 450. The firm has expressed a desire to have 10% of its fleet at each of its 68 UK depots powered by electricity.

Hermes transformed their Beckton depot to 100% electric. It now operates with 32 battery-electric Nissan eNV200 vans for central London deliveries.

Aside from logistics firms, many other fleet owners are showing commitment. For example, global specialists in energy management Schneider Electric plan to introduce ‘charging parks’ in their offices and factories and replace 14,000 vehicles in over 50 countries with electric cars by 2030. They are part of Climate Group’s EV100 initiative together with Statkraft, Mer’s parent company.

At Mer, we supported IKEA to reach its aim of 100% zero-emission deliveries by 2025, by analysing and supporting the installation of 200 chargers at sites across the UK.

Need a purer way to power your fleet? We set you and your people up with the whole package, so it’s as easy as charge, start, set off.