Company car tax on electric cars
Businesses have been slow to embrace electric vehicles into their fleet. Key factors cited have included concerns around range, higher purchase or leasing costs and underwhelming tax incentives. With changes afoot to address all of the above, now it seems, is a brilliant time to make the switch and enjoy the many benefits an EV fleet can offer.
The government in the UK is pushing the EV concept and are introducing a range of initiatives that will help and encourage businesses to consider electric.
A major change, being introduced in April this year, is the Benefit in Kind for an electric vehicle. From April onwards there will be zero tax on Benefit in Kind (BIK) during 2020 / 2021. This zero rate also applies to hybrid vehicles with emissions from 1 – 50g/km and a pure electric range of over 130 miles. The Government has also introduced a number of new tax bands for vehicles with emissions of 75g/km and below.
We also now know that the tax rate for the next three years on the Benefit in Kind rate will increase to 1% in 2021 / 2022 and 2% in 2022 / 2023, all of will allow businesses to clearly map out and plan their financial projections.
Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances allowing a deduction of the full cost from pre-tax profits.
Electric cars are able fully exempt from the congestions charge. Whilst this is only applicable to the capital at present this will change in areas where clean air zones exist or are about to be introduced. Zero Road Tax applies to fully electric cars.
The introduction of new less expensive models onto the market are opening the industry up to new audiences whist range on current and new models is continuously being strengthened.
All of these factors begin to add up to create a fairly attractive all round proposition for businesses. Taking the many potential savings into account and weighing those against a petrol engine may results in some fairly hefty savings, whilst practical issues are starting to measure up. Is company car tax on electric cars worth considering? We think so!