VAT on Electric Cars

An electric car is still a car for VAT, so the input tax block on buying one applies exactly as it does to a petrol or diesel car. There is no VAT saving on the purchase. What you can recover is the VAT on charging, on business use, where the car is charged at work or at a public charge point, and a sole trader or partner can also recover the business proportion of charging at home.

That is the whole answer, and it disappoints most people who arrive at this question. It disappoints them because every other article about electric car tax is about capital allowances, where zero-emission cars genuinely are favoured, and the reader reasonably assumes the favourable treatment runs all the way through the tax system. It does not. VAT was never rewritten for electrification. The rule that blocks input tax on cars was drafted in 1992 and it never mentions fuel at all.

So this page spends its first half explaining why the answer on the purchase is no, and its second half on the part that genuinely does differ: charging, which splits four ways and is where the real money and the real errors are.

The rule: a car is a car, whatever drives it

VAT on the supply of a motor car to a taxable person is excluded from input tax credit. That is article 7 of the VAT (Input Tax) Order 1992, and article 7(1) is blunt about it: tax charged on the supply (including a letting on hire) to a taxable person of a motor car shall be excluded from any credit under section 25 of the Act.

The word doing the work there is motor car. The definition HMRC applies in VAT Notice 700/64 is built on physical characteristics: three or more wheels, normally used on public roads, constructed or adapted mainly for the carriage of passengers. There is no reference to an engine, a fuel type, an emissions figure or a battery. A vehicle that meets the description is a car whether it burns diesel, runs on a battery, or is powered by something nobody has invented yet.

This is why the question "is VAT on electric cars different?" has such a flat answer on the purchase side. It is not that HMRC has decided to withhold a concession from electric vehicles. It is that the block was never about propulsion in the first place, so there is nothing for electrification to have changed. If you want the full picture on the block, its exceptions and how the reclaim rules work in practice, that ground belongs to our page on VAT on company cars. This page states only that the same rules apply to an EV, without exception.

Buying an electric car: the block, unchanged

Article 7 blocks the input tax and then lifts the block in a defined set of cases. The car has to be a qualifying motor car acquired for one of the listed purposes: it is stock in trade of a manufacturer or dealer, or it is for letting on hire, or for use as a taxi or in private hire with a driver carrying passengers, or for self-drive hire, or for driving instruction, or for conversion or manufacturer research. There is one further route, and it is the one most buyers reach for: the car is intended to be used exclusively for the purposes of the business.

That last route is where nearly every attempted reclaim dies, and it dies on availability rather than on use. Article 7(2G) says a taxable person shall not be taken to intend to use a motor car exclusively for business purposes if they intend to let it on hire for inadequate consideration or make it available to any person for private use, whether or not for consideration. Read that twice. The test is not whether private journeys happen. The test is whether private use is available.

In practice that means a director who buys an electric car through the company, keeps it on the drive at home, insures it for social domestic and pleasure use and holds the only key has made it available for private use. The reclaim fails even if the odometer shows nothing but client visits. Businesses that do clear this test tend to have something structural in place: the car stays at the premises overnight, the insurance is business-only, there is a written policy prohibiting private use, and there is a pool arrangement rather than an allocated driver. Those are hard conditions to meet and they are exactly as hard for an electric car as for a diesel one.

Two other purchase routes are worth naming because they look like exceptions and are not. A used electric car bought under the second-hand margin scheme arrives with no VAT shown separately on the invoice, because the seller accounts for VAT on their margin. There is no input tax, so there is nothing to block and nothing to recover. And an electric van, which is not a car at all for VAT purposes, sits entirely outside article 7 and follows the ordinary input tax rules. The classification question is about the vehicle's construction and payload, not its drivetrain, and it is worth settling before the order is placed.

Leasing an electric car: 50 per cent, unchanged

Where a qualifying car is leased and it is available for any private use, only 50 per cent of the VAT on the lease charge is recoverable. The 50 per cent block exists to cover the private use element, and it applies to an electric car in precisely the same way as to any other car. The block bites on all the VAT on the charges paid for the rental of the car under the leasing agreement, including optional services unless those services are supplied and identified separately on the tax invoice. A maintenance element invoiced as a genuinely separate supply escapes the block and its VAT is recoverable in full, subject to the normal rules.

That single distinction, bundled versus separately invoiced maintenance, is worth real money over a three-year contract, and it is decided by how the leasing company draws up its invoice rather than by anything the customer does afterwards. The mechanics of the 50 per cent block, including excess mileage and early termination charges, belong to our page on VAT on leased cars.

Charging an electric car: the four situations

Here is where electric cars genuinely part company from petrol and diesel, and it is not because HMRC wrote special rules for electricity. It is because electricity, unlike petrol, is often bought through a supply contract that belongs to somebody other than the business. VAT recovery follows the supply, and the supply does not always land where people assume.

1. Charging at work

A business that charges its vehicles at its own premises is buying electricity on its own commercial supply. HMRC's position in Notice 700/64 is that VAT incurred by businesses when charging electric vehicles can be recovered on the business use of those vehicles where the vehicles are charged at work. Business use is the limit: where the same car also does private miles, the input tax has to be apportioned, and the apportionment has to come from mileage records rather than from an estimate.

2. Charging at public charging premises

The same recovery applies where the vehicle is charged at a public charging premises. The charge point operator makes a commercial supply of electricity, the business receives it, and the VAT on the business proportion is recoverable. Keep the receipts. Most charge point apps will email a VAT invoice or make one available in the account area, and a card statement line is not a VAT invoice.

3. Charging at home, sole trader or partner

A sole proprietor, or a partner in a partnership business, can also recover the VAT for charging an electric vehicle for business purposes at home. This is a specific allowance in Notice 700/64 and it is confined to those two categories. The recovery is of the business proportion only, worked out from mileage records.

There is a wrinkle worth understanding before you calculate. Electricity supplied to a domestic property is charged at the reduced rate applying to domestic fuel and power, not at the standard rate, so the pot of VAT you are taking a proportion of is smaller than an equivalent public charging bill would have produced. That is a genuine consequence, not a penalty, and it is one reason home charging usually produces a modest VAT recovery even for a trader doing high business mileage. Check the current rate on HMRC's guidance on fuel and power and Notice 700/64 before you post the figure.

4. Charging at home, employee

This is where employers get it wrong, routinely and expensively. Where an employee charges a company electric car on their own domestic supply, HMRC's position is that the overall supply of electricity is made to the employee and not the employer, and the employer is not entitled to recover the VAT on the cost of charging the vehicle. Reimbursing the employee for the electricity does not move the supply. The employer is paying the employee; the energy company supplied the employee.

The practical consequence is sharp. The same 400 business miles, driven by the same employee in the same company car, produce recoverable input tax when charged on a public rapid charger during the working day and nothing at all when charged overnight at the employee's house. Employers who care about the recovery build a charging policy around that fact, typically by directing drivers to workplace charge points or to a fuel-card equivalent for public charging.

Boundary table: what is blocked and what is recoverable

Blocked or not recoverable	Recoverable input tax
A consultancy buys an electric car that is available to the director privately: the input tax on the purchase is blocked, exactly as a diesel would be	The same consultancy charging that car at its own office charge point, on business mileage: recoverable
An employee of a builders' merchant charges the company EV on their home supply: not recoverable, because the electricity is supplied to the employee	The same company's driver charging at a public rapid charger on a business journey: recoverable
A sole trader plumber's home charging with no mileage log: not recoverable, because the business proportion cannot be evidenced	A sole trader plumber's home charging with a mileage log: the business proportion is recoverable
A cafe leases an electric car that is available for private use: 50 per cent of the VAT on the lease charges is blocked	The separately supplied and separately invoiced maintenance element of that lease: recoverable in full
An electric car bought on a margin-scheme invoice: no VAT is shown on the invoice, so there is nothing to recover	An electric van with a payload of one tonne or more: not a car for VAT, so input tax is recoverable under the normal rules

Mileage records: why the recovery fails without them

Every recoverable line in that table depends on a number: the business proportion. HMRC requires detailed mileage records to arrive at it, and Notice 700/64 says so directly in the context of employees charging electric vehicles. A claim with no mileage evidence is not a small claim, it is an unsupported one, and on enquiry the whole charging recovery is at risk rather than the excess.

What a usable log contains is unglamorous: the date, the start and end points, the purpose of the journey and the miles, recorded at the time. Most electric cars and most fleet apps will export a trip list, which is a good starting point, but a raw trip export is not a mileage log until somebody has marked each trip business or private. That marking is the part that gets skipped, and it is the part HMRC asks for.

There is a second reason to keep the records properly on an electric car. The charging invoices themselves are fragmented: some from a workplace meter, some from three different public networks, some from a home supply. Without a mileage log tying the total to a business proportion, there is no way to reconcile a pile of small charging receipts to anything defensible.

Worked example: a sole trader charging at home

A sole trader electrician runs an electric car and charges it at home. Over the year she drives 10,000 miles in total, of which 8,000 are business miles to customer sites. Her mileage log records each business journey with date, destination and purpose.

Her business proportion is 8,000 divided by 10,000, so 80 per cent. The recoverable amount is 80 per cent of the VAT charged on the electricity used to charge the car. Two points decide what that figure actually comes to.

• The electricity is supplied to her home, so it carries the domestic rate for fuel and power, not the standard 20 per cent that a public charge point would charge. The VAT she is taking 80 per cent of is therefore materially smaller than the same electricity bought commercially. Use the current rate from the gov.uk fuel and power guidance rather than assuming 20 per cent.
• She needs to identify the electricity used by the car, not by the house. A separately metered charge point, or a charge point app that logs kWh delivered, does this cleanly. Dividing the whole household bill by a guess does not.

So the recovery is: 80 per cent of the VAT on the car's share of the electricity. If she had been an employee of a limited company rather than a sole trader, the same 8,000 business miles, charged the same way at the same house, would have produced a recovery of nil, because the supply of electricity would have been made to her personally and not to her employer. That is the same driver, the same car and the same miles, with the answer turned entirely on the legal identity of the person the energy company is supplying.

Worked example: an employer reimbursing home charging

A limited company reimburses a sales manager for charging the company electric car at home, paying her a monthly amount based on the kWh her charge point app reports. The company's bookkeeper posts the reimbursement with VAT at the standard rate and recovers it.

That recovery is wrong, and the amount is not the issue. The energy supplier supplied the manager. The company supplied nothing to itself and received nothing from the energy company; it made a payment to an employee. There is no input tax on that payment, so there is no VAT element to extract from it at any rate. The correct entry is the gross reimbursement with no VAT recovered.

The company has two clean options if it wants the recovery. Install a charge point at the premises, where the electricity is supplied to the company on its own commercial contract. Or arrange for public charging on a company account, where the charge point operator invoices the company directly. Both put the supply where the recovery needs it to be.

Where electric cars genuinely do save tax, and it is not VAT

None of the above means an electric car is a poor decision. It means the advantage is not a VAT advantage. Two reliefs do the work, and they are worth considerably more than the blocked input tax would have been.

Capital allowances. Cars are excluded from the Annual Investment Allowance and from the first year allowances that apply to general plant and machinery, and are normally relieved by writing down allowances instead. A new zero-emission car is the exception: it attracts a 100 per cent first year allowance, so the full cost can be relieved against profits in the year of purchase. That is a timing advantage on the whole purchase price, which is a much larger number than the VAT would ever have been. Our page on writing down allowances on cars sets out how the pools work, and limited company car tax relief covers the buy versus lease comparison.

The company car benefit charge. For 2026/27 the appropriate percentage for a car with zero CO2 emissions is 4 per cent of list price, against percentages many times that for a comparable petrol or diesel car. That is what makes an electric company car cheap for the driver and cheap in employer Class 1A National Insurance. Increases have been announced for later years, rising steeply from April 2028, and those later figures are not something to plan a four-year lease around without checking: use HMRC's appropriate percentage tables for the year in question.

If you are installing charge points as part of the decision, the capital allowances position on the installation is its own question and a favourable one: see capital allowances on EV charging point installation.

What people get wrong

Assuming the environmental incentives extend to VAT. They do not. The capital allowances regime was deliberately shaped around emissions; the VAT car block was not. Two different regimes, two different policies, and only one of them cares what is under the bonnet.

Treating "I only use it for work" as the test. It is not. Article 7(2G) asks whether the car is made available for private use. A car that could be driven to the shops on a Sunday, by anyone, fails, whether or not it ever is.

Recovering VAT on an employee's home charging. The single most common error on this topic, and the easiest for HMRC to find on an inspection, because the reimbursement sits in the payroll or expenses ledger with a VAT code against it and no supplier VAT invoice behind it.

Applying 20 per cent to a home charging recovery. Domestic electricity is not standard-rated, so a business proportion applied at 20 per cent overstates the claim. Take the proportion of the VAT actually charged on the bill, not of a rate you assumed.

Claiming charging VAT with no mileage log. The recovery is a proportion, and a proportion with no evidence behind it is not a claim HMRC will leave standing.

Assuming a "van-like" electric vehicle is a van. Some electric vehicles marketed as commercial fall inside the car definition on construction and payload. Establish the classification from the vehicle's specification before you decide whether article 7 applies at all.

Forgetting the maintenance split on a lease. If maintenance is bundled into the rental, it is caught by the 50 per cent block. Separately supplied and separately invoiced, it is not. Ask the leasing company how they invoice before signing.

Assuming the road fuel scale charge is irrelevant because the car has no exhaust. The scale charge is calculated by CO2 emissions and HMRC's published tables are set out for petrol and diesel vehicles. HMRC does not state a position for fully electric cars on those pages, so check the current guidance with HMRC before you build a fleet policy on an assumption either way, particularly given that opting into the scale charge commits you to it for every car in which business fuel is made available for private use.

A note on motor finance

Separately from the tax treatment, there is ongoing regulatory and litigation activity concerning historic motor finance commission arrangements. That is a consumer redress matter rather than a VAT one, and the current position is published by the Financial Conduct Authority.

Related reading

• VAT on company cars: the input tax block, the qualifying uses and how reclaims actually work
• VAT on leased cars: the 50 per cent block and what falls inside it
• VAT on second-hand cars: the margin scheme and its record-keeping conditions
• Writing down allowances on cars
• Limited company car tax relief
• Capital allowances on EV charging points
• HMRC: Motoring expenses (VAT Notice 700/64)
• Legislation: VAT (Input Tax) Order 1992, article 7