Electric vehicles exempt from company car tax

Kia e-Niro

As of April 6th, 2020, Benefit in Kind company car tax for electric cars is dropping to 0%. This is the government’s latest initiative to encourage the UK to move to green motoring. Therefore helping to reduce harmful emissions by limiting the number of non-electric vehicles on the roads. 

What is Benefit in Kind tax? 

As an employee or director of a company, you will pay tax on any benefits that you receive from the company. Benefits could include gym memberships, accommodation or indeed company cars. 

The amount of company car tax you pay depends on what the benefit in kind is and the value of that benefit in kind. 

So, when it comes to paying Benefit in Kind (BiK) tax on company cars, there are a few factors. These factors are taken into consideration when working out how much company car tax you should pay. 

  1. Car list price 
  2. CO2 emissions in g/km
  3. Type of fuel 
  4. Your tax rate e.g. 20% tax bracket or 40% tax bracket

20% Tax Payer Benefit in Kind Graph

40% Tax Payer Benefit in Kind Graph

 

There are a few ways in which you can reduce your tax: 

  1. Using the vehicle part time 
  2. Contributing to the payment 
  3. Using a low emissions vehicle

The reason we have highlighted the third option is because this is the one of most relevance to you. With HMRC making significant changes for the 2020 tax year, everyone will benefit from having an electric ‘low emissions vehicle’. 

Company car tax for electric vehicles over the next few years

So you might be thinking…

That’s great, for 2020 I can have an electric vehicle as my company car and pay 0% Benefit in Kind tax. But what about after that point? 

Well, there’s even more great news. 

As shown in the table below, Benefit in Kind company car tax for EVs for 2020/21 is at 0%. It then rises to just 1% for 2021/22 and to 2% for 2022/23. 

Benefit in Kind Tax Changes Graph

So for the next 3 years, you can either own, rent or lease an electric company car, safe in the knowledge that it will hardly cost a thing! 

How to calculate Benefit in Kind company car tax

To find out how much tax you will pay, you will have to find out the car’s P11D value. 

What’s a P11D value I hear you ask? It’s essentially the list price of the car. 

• The list price is the individual retail price published by the manufacturer, importer or distributor for the vehicle if sold in the UK

• For electric vehicles the list price is before any grants or discounts

• The list price must be provided as it stands on the day before the date on which the vehicle will be licensed and registered

• Where a vehicle does not have a UK list price the notional price must be provided.

A dealer or rental company should be able to provide you with the P11D value of a vehicle. 

You will then need to find out your car’s official CO2 emissions.

This can be done via the HMRC website – https://www.gov.uk/co2-and-vehicle-tax-tools

You will then be able to find out which tax band your car falls into. Once you have this, you’ll be able to work out how much company car tax you need to pay. 

Calculation

P11D x CO2 tax rate x income tax rate = BiK tax to pay 

Example – BMW i3 – 20% tax payer – Year 2020/21

So if you take for example a BMW i3. 

P11D value = £37,785.30

C02 tax rate for 2020/21 = 0% 

Personal tax rate = 20% 

So, here is the calculation: 

£37,785.30 x 0% x 20% = 0% or £0.00 (YES, ZERO) 

Example – BMW i3 – 40% tax payer – Year 2020/21

P11D value = £37,785.30

C02 tax rate for 2020/21 = 0% 

Personal tax rate = 40% 

So, here is the calculation: 

£37,785.30 x 0% x 40% = 0% or £0.00 (YES, ZERO) 

As Ellie Goulding would say… What are you waiting for? 

It’s a complete no brainer! 

All you have to do is buy, rent or lease an electric company car. You will only pay the cost of buying, renting or leasing an electric company car. Most companies give a company car allowance. 

With an electric vehicle, you pay no huge fuel costs either and it’s really cheap to power your electric vehicle. Most supermarkets or shopping centres allow you to park and charge up your electric car for FREE! 

Special Offer

BMW i3 Special Offer

Currently at EVision Electric Vehicle Hire, we are running a deal whereby you can have a BMW i3 94Ah (2018 plate) for £85 + VAT per week. 

All of the following is included within the price: 

  • 30,000 miles per year
  • Full maintenance and breakdown cover 
  • No London congestion charge to pay 
  • Free home charger installed 
  • Pay no deposit! 

All you have to do is insure the car and drive one of the best electric vehicles on the market today! 

I WANT THE BMW i3 DEAL

Find out more on Benefit in Kind for EVs and also about Salary Sacrifice by watching our latest YouTube video. 

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