The demand for UK leased company EVs doubled in the first six months of the tax year, from April 2020, after the latest incentive was introduced, according to research by Octopus Electric Vehicles.
As we have discussed before on this blog, benefit in kind taxation has changed in the UK, meaning that EV drivers are no longer taxed on the value of company car benefits, provided by way of salary sacrifice, if the vehicle is zero-emissions.
Previously, a 16% tax rate was applied to the EVs, with an average of 27% charged on traditional fuelled vehicles.
Fiona Howarth, CEO of Octopus Electric Vehicles, said, “EVs already make environmental and financial sense, and the many benefits of driving electric speak for themselves. They are fantastic to drive, are good for the planet, and have far cheaper running costs than petrol and diesel equivalents. Leasing an EV through our salary sacrifice scheme maximizes savings for drivers. With no upfront costs, generous tax benefits and an ever-expanding range of EVs on offer, it’s no surprise we have seen such strong uptake.”
With that said, we would like to provide current and prospective company car drivers with an extensive guide to EV company cars. Whether you are given an allowance to purchase your company car, receive the car outright from your employer or have the use of a leased company vehicle, this is the guide for you:
Benefits of an EV Company Car
The benefits of having an EV company car are largely in line with those of any other EV owner:
- Electric vehicles are more beneficial to our environment, contributing significantly less emissions into our atmosphere and helping us move towards a much greener future.
- EVs are the future and, with the UK Government’s new 2030 ban on new petrol and diesel vehicles, you will be ahead of the curve on adopting new technology.
- Electric vehicles are proven to be cheaper to run with lower fuel costs and less repairs and maintenance.
- Electric vehicles are very advanced, powerful machines and you will have endless fun making use of your new toy.
On top of these benefits, there is also the added tax break that can be gained if you use a leased EV company car.
Taxation
Until now, tax on company cars has revolved around the emissions of the vehicle in question, CO2 per km. A percentage tax rate is applied using the emissions banding, the price of the car and the personal tax rate of the employee.
For example, if you owned a BMW 3 Series with a cost price of £30,000 and an emissions rate of 124g/Km CO2 for a higher rate taxpayer, the calculation would look like this:
Company Car List price £30,000
Multiply by the tax rate (120-124g/Km band) 28%
Multiple by your personal tax rate 40%
Annual Tax payment £3,360
This is a relatively prudent example with the average fees for executive drivers over £600 per month: £7,200 per year. Moreover, the tax rate on zero-emission vehicles was 16%, so you would still be paying a significant amount of tax.
This has been completely eradicated as of 6Th April 2020 on zero-emission vehicles. For comparison, here is an example of the taxes and fees that would be incurred on a vehicle in London this year:
Petrol EV
Benefit in Kind £600 £0
Low Emissions Zone Charging £720 £0
Congestion Charge £345 £0
Vehicle Excise Fund £180 £0
Fuel1,000 miles driven on average costs £410 £20
Average Monthly Cost £2,255 £20
Obviously, this is an acute example as vehicle charges in London are higher than the rest of the UK. However, if a potential £2,235 extra spending power per month is not enough to persuade you, we don’t know what would.
Charging your EV Company Car
There are several charging solutions that can be considered for electric company cars. These are often decided by your company and will be part of the fleet transformation which has been planned to maximise efficiency.
Home Charging for an EV Company Car
Your company may provide a charging solution for your home or may contribute towards this. This would allow you to charge your new company car overnight at home and would offer the flexibility of not relying on charging at work or using public chargers.
For more information on home charging, visit here.
Workplace Charging for an EV Company Car
Your employer may also decide to install to install charger at their commercial premises. This would allow you and your colleagues to charge your EVs while at work. The provision of charging services would not be included as a workplace benefit and so would be exempt from benefit-in-kind taxation. For more information on charging at work, visit here.
Public Charging for an EV Company Car
You can charge your EV company car just like any other EV driver. This includes public fast and rapid chargers, visit here to know more.
Grants
The usual EV grants still apply for company cars. If you are purchasing your company car using an allowance, then you would still be eligible for the OLEV Plug-in Car Grant against the cost of the vehicle.
Moreover, whether you have purchased the vehicle or are using a leased company car, you are also eligible for the EVHS Grant in England and Wales, or EST Domestic Charge Point Grant in Scotland.
The difference is that, for a leased company car, OLEV or EST may require additional lease documentation from your company. For more information on grants, visit here.
Fleets
The UK government has publicly pledged to be net zero emissions by 2050 and this latest step is a sign of the value they place in the ‘company car market supporting the transition to zero emission technology’. The new tax scheme aims to provide ‘clarity of future appropriate percentages’ and allows businesses to gain ‘the ability to make more informed decisions about how they make the transition to zero emission fleets.”
At a government level, huge steps have been taken to achieve their target but the biggest impact we have seen is by the commercial sector. The trend for companies to go green has been overwhelming as they recognise consumer demand for environmentally friendly products and corporations that support a cleaner future.
Many companies see the transformation of their vehicle fleets as the perfect opportunity to implement these policies and we believe company car users should welcome these changes with open arms.
For more information on our fleet transformation consultancy services, visit here. To add fleet page to website into the consultancy section.
If you are an employer or employee interested to know more about electric company cars, please , get in touch. A member of our technical team would be happy to answer any questions that you have.