Tax Savings for electric company cars
From April 2020, rules regarding the amount of company car tax paid by drivers choosing pure electric vehicles are changing, offering significant tax savings for company car users. In addition, there are also tax savings for employers.
With regard to company car drivers, as the Government are keen to help increase the number of electric vehicles on the road, the taxable benefits and rules for measuring carbon dioxide emissions are changing. This means that company car drivers who choose a pure electric model will pay no Benefit In Kind (BIK) tax for the year from 6th April 2020 to 5th April 2021.
Pure electric vehicles, essentially cars which emit 0g/km of CO2, will enjoy a 0% BIK charge for the 2020/2021 tax year, a 1% charge for 2021/2022 and a 2% charge for 2022/2023. Additionally, cars registered before 6th April 2020 which emit between 1-50g/km of CO2 and have a pure electric mile range of 130 miles or more will be taxed at a reduced fixed rate of 2% BIK for 2020 and the next two subsequent tax years.
Alongside the tax break for pure electric vehicles for the 2020/2021 tax year, the electricity provided by an employer to charge the vehicle, for example at a station in the workplace, will also not be a taxable BIK.
From the employer’s point of view, up to 31 March 2021, the cost of buying an electric car, or a car with CO2 emissions up to 50g/km, will be 100% tax deductible – and this allowance is in addition to the normal Annual Investment Allowance for buying plant and machinery.
If you are considering changing your company car procedures to incorporate electric vehicles, contact our team of experts for further guidance who will be able to discuss your specific circumstances and ensure that you are considering the best options for you and your business.
If you would like to receive our newsletter please fill out your details below.