Given the expansion of the London Ultra low Emission Zone from 25 October 2021 and the recent fuel shortage, this may be the incentive for car drivers to go electric.
First-year allowances (FYA) 100% expenditure incurred before 1st April 2021 was tax deductible, on 'electrically-propelled' cars, which had low CO2 emission less than 50g/km. The government announced for expenditure incurred on or after 1st April 2021, the FYA will be restricted to new electrically propelled cars with zero emission only.
The company car tax or benefit in kind (BIK) rate for directors or employees for the financial year 2021/22 on electric cars is just 1% of the list price and this will rise to 2% and remain up to April 2024. The benefit could be huge savings on tax compared to a plug-in-hybrid, where the taxable BIK (depending on the electric range) will be 11% for 2021/22 and 12% for the following three tax years. In comparison a petrol or diesel car could attract BIK rates of up to 37%.
The table below shows the BIK rates for company cars first registered on or after 6 April 2020 and has been calculated on CO2 figures from the latest WLTP fuel-economy and emissions testing regulations.
|
CO2 (g/km)
|
Electric range (miles)
|
2021/22 rate (%)
|
2022/23 rate (%)
|
2023/24 rate (%)
|
|
1-50
|
More than 130
|
1
|
2
|
2
|
|
1-50
|
70-129
|
4
|
5
|
5
|
|
1-50
|
40-69
|
7
|
8
|
8
|
|
1-50
|
30-39
|
11
|
12
|
12
|
|
1-50
|
Less than 30
|
13
|
14
|
14
|
The following benefits are available for fully electric cars, without attracting any additional BIK:
- Exempt from road tax or Vehicle Excise duty (VED), rates for all pure electric reduced to £0 until at least 2025.
- Exempt from London congestion charge until 2025.
- Installation of a charging point at work the new super deduction offers 130% first year allowances until 31 March 2023.
- Installation of charging point at the employee's home.
- The employer can pay the company car driver 4p per mile, to reimburse them for the cost of the electricity used from their domestic supply or by charging roadside station, for business journeys with no tax implication.
- Recharging at work and provision of charge card to allow access to charge point.
An electric car salary sacrifice scheme means an employee can drive a fully electric company car, by forgoing a portion of their gross salary. The amount is deducted before tax and NIC is applied which means the taxable salary is reduced and less tax and national insurance is payable.
Many reasons why it may be a good time to go electric.
For more information or advice, please Contact Us.
By Mohammad Muddassir