Company Electric Car Grant - UK Tax Rate Everything to Know
Introducing electric cars into a business is both socially responsible and has a lot of different tax benefits. As the mileage range of electric cars increases, with many new models offering a range of almost 300 miles, electric cars are now much better able to cope with the demands of driving for business.
The UK government is keen to encourage more companies to think about the tax benefits of driving an electric car and have put in place many incentives to encourage more businesses to use electric cars. More than half of the cars out on UK roads are registered to businesses, and as more businesses realise how much money can be saved, more fleet managers in the UK are beginning to consider switching to electric vehicles for the fleet.
How much is company car tax on electric cars?
In 2020, the benefits of using electric cars in your fleet were made all the attractive. From April 2020, there was zero tax of Benefit in Kind (BIK) for that tax year for fleet operators and company car drivers. This rate also applied to hybrid vehicles with emissions from 1 - 50g/km and a pure electric range of over 130 mobiles.
The tax rate increased to 1% for 2021/2022 and will rise to 2% in 2022/2023. If you’re thinking about choosing an electric or hybrid vehicle for your fleet, it’s well worth looking at electric car benefit in kind.
Are electric car leases covered under the car tax rules?
Companies taking out a new lease on Jaguar electric vehicles will benefit from the car tax rules, making this well worth exploring as a cost-saving option, as well as a way to be socially responsible with your business fleet.
Is the Benefits in Kind rate different for Hybrids, and fully Electric cars?
Plug-in and other hybrid vehicles will also incur BIK, which will be calculated at the same rate as fully electric vehicles. After 2020/2021, the cost will depend on how far the vehicle can be driven in electric mode, and on their CO2 emissions.
There are lots of popular options for plug-in hybrid cars that can cover between 30 and 39 miles on electric alone. Drivers of these cars will pay BIK at 10%. Cars that are able to go further on electric power alone, up to 49 miles, have a lower rate of 60%. Whichever you end up paying, it’s a lot less than the 20% or more that you would have to pay for petrol or diesel cars. There are lots of savings to be made.
In fact, there are now 11 new tax bands for vehicles with emissions of 75g/km and below, some of which are linked to the electric mile range that the vehicle offers.
Are electric vans covered under the new car tax rules?
Electric vans also benefit from a lower tax rate. If your company provides you with a van for your private use, you will have to pay a ‘van benefit charge’, however, instead of company car tax. For petrol or diesel vans this is more expensive, but employees can expect to pay around 20% less on an electric van, making them well worth considering for a cost-saving.
Do I have to pay tax on a company electric car?
Tax works slightly differently for electric cars. If your car has CO2 emissions of less than 50g/km, it will also be eligible for 100% first-year capital allowances. This means that you can deduct the full cost from your pre-tax profits. If your electric car cost around £40,000, this could net you a tax relief of £7,600 in the first year. This shows how worth considering an electric car is.
Vehicle road tax is also worked out based on CO2 emissions, and pure electric cars are exempt from first-year road tax, making it free to tax them. All cars that were registered on or after 1 April 2017 have slightly different tax bands. Fully electric cars have no tailpipe emissions, so are exempt from road tax. Some hybrid vehicles with CO2 emissions of less than 100g/km could have to pay between £0 and £135 per year, depending on their levels of CO2 emissions.
However if your vehicle was registered on or after 1 April 2017 and cost over $40,000, you will still be liable to pay an additional road tax charge. Electric cars that fall into this category will have to £325 per year on road tax. However, petrol and diesel cars registered in the same time period would pay £475, so there are still savings to be made.
What are the company car tax rules?
If you or your family use a company car for private use, including for commuting, you will have to pay tax. You will pay tax on the value of the company car, which depends on things how much it would cost you to buy, and the kind of fuel it uses. The value of the car will be reduced if you only have access to it part-time, you pay towards its costs, or it has lower CO2 emissions. If your employer pays for fuel for personal journeys, you will have to pay tax on this separately. If your company car has CO2 emissions of 1 to 50g/km, the value of the car is based on its zero emission mileage figure, or ‘electric range’. This is the distance the car can go on electric power before its batteries need recharging.
How much does it cost to charge a company car?
Rising fuel costs, which look likely to only get worse in the future, can put a real financial strain on many business drivers. The lower cost of running an electric car is a very attractive option and is one of the main incentives for fleets to switch to electric cars, rather than petrol or diesel.
Switching to electricity will mean that a domestic electric car user will pay only 5% in tax. Business users will have to pay 20% tax on the electricity needed for charging, in the same way as fuel at the pump. However, there is no fuel tax duty to be paid on electricity like there is for diesel or petrol, offering another saving. Fuel tax duty is currently set at about 58p a litre before tax is applied.
Electricity is a lot cheaper per mile than petrol or diesel, so if you have to travel long distances for work, you can make some big savings on your running costs. If you’re charging the car at work, this can bring down the costs even more.
To persuade employers to provide charging facilities for all-electric and hybrid vehicles at their business premises, employer-provided electricity is not taxed as a benefit in kind, although there are some conditions that must be met for this. Electricity must be provided through a dedicated charge point, which must be at or near the workplace. Charging also needs to be available to all the employees at a particular location.
How does the government electric car grant work?
For businesses looking to make the switch to electric vehicles for their fleet that intend to offer employees the option to charge their vehicles at work, there is a grant available to put in the infrastructure needed for charging electric vehicles.
The Workplace Charging Scheme (WCS) is a government scheme for electric cars that are offered by the Office for Low Emissions Vehicles. This scheme will reduce the cost of purchasing and installing a new charging station at the workplace by 75%, capped at £350 per socket. Any one business can claim for up to 40 charging points. Only new charge points will be eligible for the grant.
The scheme can be used by any business, charity, or public authority, although there are some conditions that must be met in order for the business to qualify. In order to apply for the scheme, you must have enough off-street parking to fit the charging stations. You don’t have to have electric vehicles as part of your fleet currently, but you do need to have an existing or future need for the business. You will also have to have the charging station installed by a workplace charging station installer that has been approved by the Office for Low Emission Vehicles (OZEV).
The Workplace Charging Scheme is a voucher-based system. In order to claim your vouchers for your new charging stations, you will have to complete an application form online, on the government website. If your application is successful, you will be emailed a voucher code which you can then present to an OZEV-approved charge point installer. Your installer then uses that voucher to claim the grant after they have completed the installation process. Once you have been given a voucher code, that voucher will be valid for 120 days from the date of issue, so you have time to find an installer and have the work done before it expires.
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