Electric company car running costs
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An electric company car has two running-cost views: what the employer pays and what remains with the driver. Record charging bills, business-mileage reimbursements and employer-paid charging separately. Advisory rates help calculate eligible mileage payments, but they are not your electricity tariff and do not replace evidence of the actual cost.
- Separate employer and driver
- Advisory rates are not tariffs
- Avoid duplicate reimbursement
Intelligent Vehicle Finance is a credit broker, not a lender, and receives a commission from the lender or funder when an agreement completes. A trading style of XLCR Vehicle Management Ltd, authorised and regulated by the Financial Conduct Authority (FRN 315268). Subject to status and availability.
Key facts
- From 1 September 2026, the advisory electric rate is 7p per business mile for home charging of a fully electric company car.
- The public-charging advisory electric rate is 15p per business mile from the same date. Mixed charging requires a fair and reasonable split.
- HMRC reviews advisory rates on 1 March, 1 June, 1 September and 1 December. Check the rate for the claim period.
- Section 239 can exempt reimbursement of electricity solely for a taxable company car, including private use; evidence must identify that car’s electricity.
- The separate workplace-charging exemption in section 237A has conditions, including general employee availability. Company-car charging has its own section 239 treatment.
- Employer Class 1A NIC on taxable car benefits is 15% for 2026/27. Electricity reimbursement and the car benefit must not be merged.
One reimbursement, two cash views
H is the driver’s company-car home-electricity spending, P is their public-charging spending and W is charging paid directly by the employer. A reimbursement moves money between employer and driver; it cancels in the combined energy total H + P + W. Other running costs and car-benefit tax are separate.
Put the diagram to work
- Record who paid for each charging session.
- Identify the agreed reimbursement method.
- Reconcile both views without a duplicate claim.
Choose the reimbursement route before doing the sums
Start by identifying the car: this guide concerns a fully electric company car. It does not apply the company-car advisory rate to an employee’s own car. Plug-in hybrids also use a different advisory-rate treatment.
Then identify the method the employer has agreed. A business-mileage payment and repayment of evidenced company-car electricity are different records. HMRC’s tax treatment does not itself oblige an employer to reimburse every charging cost. Ask payroll to confirm the policy and which journeys qualify.
Use a charging log with date, vehicle, location, units if available, amount paid, payer, business-mileage allocation and reimbursement reference. Mark employer-paid sessions separately. This prevents the same public-charge receipt appearing both as an expense and within an unreconciled mileage claim.
The comparison
| Charging route | Employer view | Employee view | Record and control |
|---|---|---|---|
| Driver pays at home, mileage reimbursed | Pays the agreed eligible company-car business-mileage claim. | Pays the electricity bill; keeps any unreimbursed amount in a separate personal column. | Business journeys, charging-location allocation and applicable advisory rate; exclude the same miles from another claim. |
| Driver pays at home, actual company-car electricity reimbursed | Check section 239 and supporting evidence; no employer input-VAT recovery on the employee’s home supply under current HMRC guidance. | Receipt reimburses identified company-car electricity, potentially including private use. | Charger readings, tariff, dates, car identity and reconciliation excluding household electricity. |
| Driver pays at a public charger | Reimbursement or a business-mileage method must be identified. VAT recovery needs its own invoice and use analysis. | Retain charging receipts and record any employer reimbursement. | Check that a receipt and a mileage claim do not reimburse the same energy twice. |
| Employer pays public charging directly | The employer already has the energy cost; do not add it again as a driver reimbursement. | No personal cash outlay for that session. | Charge-card invoice, vehicle and driver; exclude from a duplicate employee claim. |
| Employer provides workplace electricity | Record employer energy cost and confirm the relevant exemption. | No separate cash reimbursement for electricity the employee did not purchase. | Company-car section 239 treatment; for other qualifying vehicles, check section 237A conditions. |
Worked example: mixed charging with two separate cash views
Illustration, not a quote. Assume 800 qualifying business miles in one claim period after 1 September 2026. Supported charging records justify allocating 600 miles to home charging and 200 to public charging. The split is illustrative, not an assumption that every driver charges in that proportion.
Using the current advisory rates, the home allocation is 600 × £0.07 = £42. The public allocation is 200 × £0.15 = £30. The total business-mileage reimbursement is £72. The employer pays £72; the employee receives £72. These are opposite sides of the same transfer, not two separate energy costs.
Let H be the employee’s actual home-electricity spending attributable to the company car in the period and P the employee’s actual public-charging spending for it. These may include both business and private use. The driver’s remaining energy cash cost is H + P - £72, assuming that is the only reimbursement. Do not describe £72 as the actual electricity bill or automatically as the business share of H + P.
Let W be charging the employer pays directly. The employer’s charging cash outflow is £72 + W, before its own VAT or tax adjustments. Combined employer-and-driver energy spending is H + P + W; the £72 transfer cancels when the two sides are reconciled. The car benefit, insurance and other running costs are separate.
If the employer instead reimburses all evidenced H + P under the applicable company-car electricity treatment, replace the £72 claim with that payment. Do not add both methods for the same electricity. Record any different policy for private costs before processing the claim.
| Input | Home | Public | Total |
|---|---|---|---|
| Supported business-mile allocation | 600 miles | 200 miles | 800 miles |
| HMRC advisory electric rate, from 1 September 2026 | 7p per mile | 15p per mile | Not a blended electricity tariff |
| Illustrative reimbursement | £42 | £30 | £72 |
| Actual employee spending | H | P | H + P |
| Employee cost left after this one reimbursement | Shown in total | Shown in total | H + P - £72 |
Home reimbursement: identify the car’s electricity
HMRC says the company-car exemption can cover reimbursement for charging at home or at a public point, including business and private mileage. The employer must ensure the reimbursement is solely for that company car. A household bill alone may not show the necessary split.
Keep charger or metering data and the applicable tariff, and agree a defensible way to identify company-car consumption. Do not allocate the entire home electricity bill to the car. Ask payroll how shared chargers, another vehicle and any mixed-use evidence will be treated.
Income-tax exemption does not mean input VAT is recoverable. HMRC’s current motoring notice says home electricity supplied to the employee is not supplied to the employer, so the employer cannot recover that VAT. For public charging, invoice evidence and business/private-use records support a separate normal input-tax analysis.
HMRC’s National Insurance guidance also excludes qualifying company-car electricity reimbursements from earnings where the conditions are met. Keep that separate from employer NIC on the taxable car benefit itself.
Talk through the agreement questions
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Workplace charging: apply the correct exemption
For a company car, HMRC identifies the exemption for electricity and connected services under section 239. A separate workplace exemption can cover other vehicles used by employees, including as passengers, if its conditions are met.
That separate exemption requires charging facilities at or near the workplace and availability to employees generally, or generally at that workplace. It does not cover an employee’s home charger or reimbursement for charging elsewhere. It also has an optional-remuneration exclusion; ask payroll if that is relevant to an existing employment arrangement.
Free workplace electricity changes who pays for energy. It does not remove the employee’s company-car benefit merely because charging has no separate benefit charge.
Check the actual cost when the charging pattern changes
Advisory electric rates are reimbursement benchmarks, not a promise about a particular tariff or vehicle’s efficiency. Public charging can cost more than the benchmark. HMRC allows a higher amount where a higher cost per mile can be demonstrated; keep the supporting calculation and have payroll confirm treatment.
For budgeting, use actual energy purchased for the car and your own tariffs, including the effect of charging losses and any applicable session or parking fees. No range, efficiency or charging-time figure here is a claim for a particular IVF derivative.
Revisit the policy if home access disappears, public charging becomes frequent or the vehicle changes. Retain the old and new evidence periods rather than applying today’s pattern to the entire lease.
What to take to your accountant and payroll team
Take the car identity, P11D information, private-availability facts, business-journey record, home tariff, charging-session evidence, employer policy and invoices. List separately what the driver bought, what the company bought directly and what has already been reimbursed.
Ask them to confirm the reimbursement treatment, VAT position, car benefit and employer NIC independently. Add insurance, servicing, tyres, vehicle taxes and any contractual changes to the running-cost budget. A complete vehicle acquisition model belongs in the lease-versus-buy guide.
Intelligent Vehicle Finance can discuss the agreement and vehicle requirements; your employer sets its reimbursement policy. This page is general information, not tax, legal or accounting advice. Ask your accountant to apply your own figures before relying on a tax outcome.
Keep vehicle taxes separate from the decision above
For 2026/27, the standard annual VED rate after the first year for cars registered from 1 April 2017 is £200; older vehicles can differ. The zero-emission first-year amount is £10 for eligible new registrations. Check what the agreement includes and who bears later increases.
The Expensive Car Supplement is £440 in 2026/27 for five years from the second tax year where applicable. The list-price threshold is over £50,000 for qualifying zero-emission cars registered from 1 April 2025, and over £40,000 for other cars. Later annual amounts need rechecking.
eVED is proposed from 1 April 2028 for electric and plug-in hybrid cars, in addition to VED. It is not currently in force; legislation and lease implementation must be checked. Keep any proposed cost separate from confirmed contract charges.
For a zero-emission company car, the benefit percentage is 4% in 2026/27, 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. The employee’s tax and employer’s benefit-related NIC are separate costs. These EV percentages do not apply indiscriminately to hybrids; use the tax guide or calculator for the actual car and circumstances.
Read the eVED proposal and lease implications; check the Expensive Car Supplement rules.
Related reading for the next decision
Your questions answered
Running costs and advisory rates
What does an electric company car cost to run?
Separate electricity, insurance, maintenance, tyres and vehicle taxes from the vehicle agreement itself. Then split employer-paid costs from driver-paid costs and reimbursements. The car benefit is a separate personal tax calculation; there is no universal EV running-cost total.
What are the current advisory electric rates?
From 1 September 2026, the advisory rates for fully electric company cars are 7p per mile for home charging and 15p for public charging. Check the rates for the relevant claim period and the employer’s policy. They do not apply to plug-in hybrids as electric rates.
How do I split home and public charging?
Use evidence of how much charging happens at each location and apportion business mileage fairly and reasonably. Retain the method with the claim. Do not automatically use a charging-location split copied from another driver or an illustration.
Can an employer reimburse home charging for private journeys?
HMRC’s section 239 treatment can cover reimbursement of electricity solely for a taxable company car, including private use. The employer must identify that car’s electricity and confirm its policy. A tax exemption does not require the employer to pay every household or motoring cost.
Reimbursement, charging and VAT
Is workplace charging a taxable benefit?
Company-car electricity has an exemption under section 239. A separate exemption for workplace charging of other qualifying vehicles has conditions, including location and availability to employees generally. Confirm which rule applies; free charging does not remove the car benefit.
Can the employer reclaim VAT on home charging?
HMRC’s current guidance says the employee’s home electricity supply is made to the employee, so the employer cannot recover VAT on that charging cost. Public charging has a separate normal input-tax analysis requiring appropriate evidence and use records.
Are advisory electric rates the actual cost of electricity?
No. They are HMRC benchmarks for the specified company-car mileage treatment. Your actual expenditure depends on the energy bought, tariff and charging pattern. A higher amount can be supported where the higher cost per mile is evidenced.
Actual costs and future planning
What if I pay more for charging than my employer reimburses?
Keep the shortfall and supporting business-travel electricity costs separate. HMRC identifies a possible deduction for qualifying unreimbursed business electricity costs; ask your tax adviser about eligibility and how actual reimbursement affects it. Relief is not an automatic cash reimbursement of the whole difference.
Does free charging remove company car tax?
No. A separate exemption for electricity does not abolish the taxable car benefit where the company car is available for private use. The car’s benefit percentage and the driver’s tax circumstances still matter.
How should a lease crossing April 2028 be budgeted?
Keep current charging and VED costs separate from a proposed eVED scenario from April 2028. Do not assume a funder’s pass-through arrangements or freeze advisory rates for the whole lease. Follow the eVED article and recheck the agreement and policy before relying on a future total.
Sources and update
Primary tax and accounting sources checked 29 September 2026. Contract terms remain specific to your agreement.
- HMRC advisory fuel and electric rates
- HMRC company-car electricity treatment
- HMRC workplace charging exemption
- HMRC NIC treatment of company-car electricity
- HMRC motoring expenses and charging VAT
- HMRC employer rates for 2026/27
- GOV.UK vehicle tax rate tables
- GOV.UK electric vehicle tax guidance
- HMRC proposed eVED policy
- HMRC current company-car percentages
- HMRC future company-car tables
- HMRC company-car rates for 2028 to 2030
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Authorised and regulated by the Financial Conduct Authority, FRN 315268
Rated 4.9/5 on Feefo
Editorial responsibility: Stacey Smith, Brand Director, Intelligent Vehicle Finance.
Last updated: September 2026
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