The increasing taxes on company vehicles in recent years has led to a reduction in the uptake of businesses with their own vehicles. This could be an oversight for many as businesses of all sizes can hugely benefit from having their own company vehicles and even more so if you are willing to go electric.
From 2020 it may be more cost effective for businesses to offer a company car if they are electric. Aside from the benefits in terms of capital allowances, from January 2020, the cost of having an electric vehicle to the employee or directors are greatly reduced.
Benefit in Kind Value (BIK) & CO2 Emissions
All company vehicles are taxed based on the list price of the car and the CO2 emission percentage – regardless of the age of the vehicle. This is known as the benefit in kind value and it is this value that is taxed as part of the employee’s salary. This is then payable by the employee as calculated within their tax percentage and through the business’s national insurance contributions.
CO2 emissions are split into 21 emission bands, ranging from vehicles that emit 0-50g/km to vehicles emitting 180g/km or more. The higher the CO2 emission the higher the emission percentage and therefore the higher the tax.
From 2020 the Government are set to promote and support the roll out of electric vehicles, with fully electric cars emitting zero CO2. The BIK percentage for fully electric vehicles will reduce from 16% to 0%, with a rise to 1% in 2020/21 and 2% in 2022/23. This trend will also be supported for low emission cars, of less than 50g/km, with a lower BIK percentage assigned for vehicles from the electric range.
The difference to your business
Based on VW E Golf:
BIK Percentage | 16% | 0%
Car List Price | £33,785 | £33,785
BIK Total | £5,405.60 | £0
The taxable benefits will allow businesses, big and small, to make a huge saving by switching to electric company vehicles. In the short and long term not only would this be advantageous for your business but for your employees, not to mention the environment!
If that wasn’t enough, there are more benefits to selecting an electric company vehicle.
- For vehicles with CO2 emissions of 50g/km or less your business may be eligible for a grant of up to £3,500.
- Zero emissions vehicles costing less than £40,000 are exempt from road tax.
- HMRC have also confirmed that companies can provide electricity for company vehicles with no additional BIK value added, thereby reducing the potential shortcomings associated with fuel.
The only possible downside to electric vehicles could be the limited range of vehicles currently available, however the benefits to your business of having an electric company vehicle far outweigh this reality.
The below website provides additional information in relation to BIK percentages and the function to search for vehicles by their CO2 emissions: https://www.nextgreencar.com/
For more information and to see how beneficial electric vehicles could be to your business please contact Byte Accounting.