Company cars with petrol engines can be expensive for tax purposes, especially those that also have a higher list price.
However, there is a very low benefit in kind charge on electric cars, currently 2%, and we are told that this is to be frozen until 2025. This means that providing a fully electric company car can now be a very tax-efficient part of an employee remuneration package.
A fresh round of new electric car releases in recent months is really changing the picture on company cars for employees. There are now fully electric versions of popular small cars such as the Peugeot 208, Fiat 500, Vauxhall Corsa, and Mini, to name a few, in addition to a range of other more “bespoke” small electric cars such as the Honda E and Renault Zoe for example.
|Electric v Petrol||PETROL||ELECTRIC|
|Example - Vauxhall Corsa||Corsa 1.2 GS Line||Corsa-E 100kW GS Line 50kWh|
|Based on 5000 miles pa and 3 years|
|BIK Value (list Price)||£19,245||£28,500|
|All costs based on a full 3 - year cost|
|Total cost to Employee over 3 years|
|BIK tax for 20% taxpayer||£3,233||£342|
|Total cost to Employer over 3 years|
|Lease cost including maintenance*||£11,060||£13,366|
|Class 1 A NIC on the BIK||£2,433||£257|
|Insurance (fleet policy) estimated at||£1,000||£1000|
|Road Tax (VED)||£330||£ -|
* Based on quoted prices on a sample lease company website selected on 14.6.22
What we can observe from the example above is that the employee will pay almost 90% less tax over 3 years than if they had chosen the petrol version.
What is also very interesting is the cost to the employer, once we have factored in the Class 1A national insurance cost and road tax, the total cost to the employer over 3 years is actually very similar in this example!
Fully electric vehicles of course may not suit everyone’s lifestyle or commute due to range and access to charging facilities, and individuals should research the viability in their particular circumstances.
As always, especially in this complex area, we recommend that you speak to your accountant ahead of making any changes to company vehicles and any other taxable benefits. Selecting a company car without getting advice on the tax consequences could adversely affect you for years to come! For further information or help on this topic please contact us at firstname.lastname@example.org or call 02476673160.
The vehicles referred to in this article are for illustration only and no recommendation of any particular make or model of vehicle is implied.
Tax and NIC calculated on current 2022/23 tax year rates published by HMRC. Please note: This article is provided for information only and was correct as at time of writing (21/06/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.