You may have noticed that the government has changed its mind towards diesel recently. This comes after years of diesel cars being actively promoted due to their low CO2 emissions, overlooking the fact that diesel cars emit particulates and other emissions such as NOx, in greater quantities than any petrol car would. Historically, if you were provided with a company car, it is likely that you would have selected a diesel version for that very reason (lower CO2 emissions), amongst others such as superior “real world” fuel economy.
What is the government promoting now, I hear you ask?! Well, to meet society’s demand for clean air in cities, they are now very keen to promote vehicles which have the potential for zero emissions, such as electric vehicles (EV) and Plug-in Hybrid Electric Vehicles (PHEV).
Low rates for zero-emission cars
To help encourage the take up of EVs and PHEVs, the government have introduced some very low benefit-in-kind (BIK) rates for these types of vehicles, which are beneficial to employees with company cars.
Here is a comparison of the costs of an EV, PHEV and diesel company car with similar P11D values (list prices);
|Nissan Leaf Hatchback
2.Zero ProPilot & Cold Pack auto 5d
PHEV 3h 2.0 4WD auto 5d
|BMW 3-series Saloon
320d M Sport 4d
|Fuel type||Electric||Plug in Hybrid EV (petrol)||Diesel|
|Tax 20% (£)||787||969||121||903||1,112||834||2,022||2,224||2,291|
|Tax 40% (£)||1,574||1,938||242||1,806||2,224||1,668||4,044||4,448||4,583|
|Tax 45% (£)||1,771||2,180||272||2,032||2,502||1,876||4,549||5,004||5,156|
As you can see from the table, the real shift comes from 6 April 2020 when the BIK percentage for an EV drops to just 2%! Using the example of the Nissan Leaf above, this means that the tax cost to an employee of having such a company car is just £121 for a basic rate taxpayer, rising to £272 for an additional rate taxpayer. Comparing this to the tax cost of between £2,291 (basic rate) and £5,156 (additional rate) for the BMW 320d.
If you run your own company, providing yourself with a Nissan Leaf (other electric cars are available) could be as close to “free motoring” as you can get!
The benefits to your business
Purchasing an EV or PHEV (rather than a diesel) is not just advantageous for the employee using the car, but also for the business owner too. Irrespective of whether you are a sole trader, in partnership or run a limited company, all EVs and the majority of PHEVs have CO2 emissions of less than 50g/km, which means that your business can claim 100% tax relief in the year of purchase, reducing taxable profits immediately following the cash outlay.
Diesels and other combustion engine cars are only likely to attract relief of 18% (CO2 between 75g/km and 130g/km) or 8% for cars with CO2 emissions above 130g/km.
Tax relief for charging the vehicle
If the tax reliefs mentioned above are not enough to persuade you into an EV or PHEV, then perhaps the following advantages (where the car is provided to an employee as a company car) will help you;
- Company cars charged at work can do so without a taxable benefit arising on the employee.
- Employers can pay for a home charging point to be installed at the employee’s home, without a taxable benefit arising on the employee.
- Employers can pay for a charge card of £100 per year to allow employees unlimited access to local authority vehicle charging points, without a taxable benefit arising.
If you would like to discuss any of the above prior to selecting your next company car, please do get in touch.