Company Car Tax Incentives to Go Electric

There are many incentives for buying an electric car in the UK, including plug-in grants for low emission vehicles, zero or reduced road tax bills, and accessible on-the-go electric charge points across UK road networks.

As we see the momentum build around consumer interest in electric vehicles (EVs), it’s interesting to see how employers are also playing their part. In particular, let’s take a look at what employers and the government are doing to offer employees company car perks and incentives to go electric in 2019.

What are the incentives for driving an electric car in the UK?

One of the most important incentives for private vehicle owners to go electric is to take advantage of the Plug-In Car Grant which covers up to £3,500* depending on the model. There are also tax-exemption benefits on Registration Tax and VED Road Tax for all zero emission vehicles under £40,000 and reduced tax for plug-in hybrid vehicles.

But when we look specifically at corporate (non-private) EV purchases and the benefits to going green with your new company car, what incentives are in place to encourage electric models over traditional engine models?

Most notably the answer is in the company car tax (known as Benefit in Kind tax) which is significantly reduced for electric and hybrid engines. Employees who have access to a company car are exempt from the usual Registration and VED tax, but a Benefit in Kind (BiK) tax is applied and deducted at the source instead.

Who pays for company car tax?

Before we begin to calculate company car tax on electric vehicles, it may be worth recapping how company car tax BiK works.

Company car tax is a form of vehicle tax which applies when an employer buys a car for an employee’s private use (not just work-related travel). This is an added perk to an employment package beyond your salary, which is why it has a tax, payable to the HMRC.

How is company car tax calculated?

Company car tax is dependent on the level of vehicle emissions - which is obviously advantageous to EV models, but is also calculated based on list price and how much the employee using the car earns (specifically which tax bracket is applicable).

Your company car is therefore taxed at different rates depending on:

So how is company car tax applied for electric vehicles?

As the above explains, the overall BiK rate is partly calculated based on the amount of CO2 your model of car emits. Those with higher rates of CO2 pollution are penalised, in contrast to electric ‘green’ vehicles. This provides a huge benefit for zero emission fully electric and reduced emission plug-in cars, as this will lower the amount of company-car tax to be paid.

However, the breakdown does not stop there. Due to an increase in demand for electric and hybrid cars, not all EVs are treated the same. Before 2018 all EVs would have been tax-exempt, whereas now the HMRC taxes EVs according to how many miles they are capable of on zero-emission mileage.

A calculator is available on the HMRC website and a breakdown of rates for low emission EVs are shown in the table below.

 

CO2 Emissions

Zero Emission Mileage

2018/19

2019/20

2020/21

0

 

13%

16%

2%

1- 50

> 130

13%

16%

2%

1 - 50

70 - 29

13%

16%

5%

1 - 50

40 - 69

13%

16%

8%

1 - 50

30 - 39

13%

16%

12%

1 - 20

< 30

13%

16%

14%

51- 54

 

16%

19%

15%

55 - 59

 

16%

19%

16%

60 - 64

 

16%

19%

17%

65 - 69

 

16%

19%

18%

70 - 74

 

16%

19%

19%

75+

 

16%

19%

20%

 

You can see that the Government has applied increases to the BIK tax rate for electric and hybrids in 2019/20, but plan a dramatic drop in tax to as little as 2% for the ultra-low emission, longer range EVs on the market (effective from 2020-21.

EV company car tax Vs Diesel?

Due to this significant drop in BiK tax, by 2020/21, tax on electric and hybrid cars will be cheaper than any other engine type on a company car.

Most notably, new diesel cars which will see a 4% surcharge on top of the BiK tax unless you buy a RDE2-certified model. So while EV models may carry a higher price tag, if they are available on your company car scheme when you consider your next model, they will be the most cost effective BiK rate in 2020/21.

Company charge point access

For all EV motorists, there is access to a network of public charge points to keep you fully ‘fuelled’ on the move, made easier still by apps such as Zap-Map to locate chargers in real-time.

Having a charging point in the workplace will become an increasingly important facility for employees, and potentially essential for EV operating fleets. Being able to charge while you go about your work and are parked is a hugely convenient and economical way to charge your EV.

Similar to at-home charging point grants, for employers, the government are offering financial support to have charge points installed at their premises as part of the Workplace Charging Scheme. The grant provides up to £500 per socket at 75% of the total cost of installation for dedicated off-street parking. If your company does not have such facility, it may be worth asking them to enquire about the Workplace Charging Scheme before purchasing your next company EV. Full guidance on grants and the application process can be found at Gov.uk.

Should you next company car be electric?

There are many factors to consider before transitioning to an EV, from charging to running costs, to researching innovative brands leading the way. Here are a few more tips to help you decide on your next electric car purchase:

How Much Do Electric Cars Cost To Run: The Facts

Electric Car Innovations in 2019

Stop Press: 2019 Year of the SUV