Government agency HMRC increases the amount eligible for electric vehicle (EV) drivers to claim back in tax rebates
The UK's Her Majesty's Revenue and Customs (HMRC) has announced a significant change in the way electric vehicle (EV) charging costs can be claimed back for company-owned vehicles. This new system, effective from September 1st, aims to provide a more accurate reflection of the actual costs associated with charging EVs.
In a move that marks a departure from the previous simplistic approach, the Advisory Electric Rate (AER) will now differentiate between home and public charging costs. Drivers can claim 8p per mile for home charging and 12p for public networks. This adjustment is expected to address concerns that have been raised since the AER's introduction in 2018.
The AER will be adjusted every quarter, taking into account the weighted average efficiency for electric company cars, domestic energy prices, and the Zapmap Price Index for public chargers. However, it's important to note that the public charging AER does not account for the higher price for using 'ultra-rapid' chargers (with an output of more than 50kW).
The average cost of using ultra-rapid chargers, according to Zapmap's latest Price Index, is 76p per kWh, nearly 50% higher than the AER. This means that using an ultra-rapid charger for an efficient EV like the Mercedes-Benz CLA would cost 15p per mile, which doesn't cover the driver's costs. On a public charger, the CLA would cost 10p per mile based on Zapmap data, while the least efficient version of the Mercedes-Benz EQS SUV would cost 18p per mile.
The Zapmap Price Index also expects a price increase of around 10% for ultra-fast charging stations in 2023. This could further impact the costs for EV drivers using public chargers.
HMRC's new system also applies to hybrids, including plug-in hybrids. The AFR system for petrol, diesel, and LPG vehicles remains more granular, with different rates based on engine size and each fuel type.
Fleets can pay higher mileage rates to match their actual fuel and charging expenses, but must provide proof to HMRC or risk being taxed on the excess as additional income. This new system is a step towards a more equitable approach to EV charging costs for company-owned vehicles in the UK.
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