How Taxpayers Lose £24,000 a Year When Someone Switches to an Electric Car

Why is the Government using taxpayers’ money to subsidise relatively well-off company car drivers more than £2,000 a month to slum it in £70,000 electric cars?

I don’t want to come across as some po-faced champion of the people. I drove a company car for years, exploiting every tax loophole known to man and I confess I’d no doubt be at the front of the queue to grab an EV tomorrow if anyone was foolish enough to employ me and throw in an EV as part of my salary package. In truth, I feel a bit like a member of the Magic Circle about to betray the secret of exactly where the rabbit is hidden before it’s pulled from the hat. Except, in this case I’m going to explain just how much the rest of us are spending on cross subsidies to allow company car driving executives to burnish their personal green credentials as they swan around in £70,000 EVs.

Let’s suppose I was employed and that my current company car was a £70,000 diesel powered BMW and on October 1st I switched it for a £70,000 BMW EV. Company car tax rates are complex and vary from car to car, but typically I might expect to have been paying £9,800 in tax per year on the diesel BMW. By switching to the EV my tax bill would go down to £560. I’d be better off by £9,240 and HMRC’s tax take would be down by £9,240, which the rest of you would need to make up.

I know lots of people who have an EV. I don’t know any who don’t like them; no one I’ve come across would swap back to an internal combustion engine car. Why are we subsidising them?

But the subsidies don’t stop there.

Let’s assume the £70,000 diesel BMW achieves 40mpg and that it covers 18,000 miles per year. Let’s also assume that diesel costs £1.85 per litre. Over the year I’d spend £3,785 on diesel of which £1,083 would be excise duty and £631 would be VAT. Add them together and we get a total of £1,714 collected in tax.