3 min read

With no new petrol and diesel cars and vans to be sold in the UK after 2030, and with hybrid sales banned from 2035, there is now more momentum than ever around getting drivers into cleaner vehicles.

With almost 456,000 zero-emission Battery Electric Vehicles on UK roads (RAC), if you are thinking of making a change to your car, you now have more choice than you would have last time you went car shopping.

The growth of electric cars

Most of the car manufacturers are prioritising a move towards electric cars. They have either an electric or hybrid version available in their range of cars for sale. If you are considering an electric car we give you guidance below.

Consider an electric car if…

✔ You drive less than 150 miles per day
✔ You have a garage or driveway
✔ You’re a company car driver
✔ You drive in central London
✔ You want to do your bit for the environment

Electric cars aren’t so good for…

✘ Regular journeys of several hundred miles
✘ Daily on-street charging
✘ Cheap purchase prices
✘ Towing

Government subsidies available

New zero-emission electric car still qualifies for a £3,500 grant from the government. New and used electric car owners also benefit from a grant towards a home charger, which can recharge batteries up to three times faster than a three-pin plug.

New zero-emission electric cars costing less than £32,000 qualify for a £1,500 grant from the government. New and used electric car owners also benefit from a grant towards a home charger, which can recharge batteries up to three times faster than a three-pin plug. 

The Office for Low Emission Vehicles provides a grant of up to £350 for most charge points for electric and plug-in hybrid cars, reducing the cost of some units to little more than £200. 

Tax on electric company cars

The benefit in kind rates for company cars has meant that the popularity of company cars has dwindled over the last two decades. This could be about to change now that reduced rates are being introduced for 100% electric cars from 6^th April 2020 meaning that the benefit in kind charge is negligible. 

For all fully electric cars on sale, the BiK rate is just 2% during the 2022/23 tax year at which it will remain during 2023/24 and 2024/25 (see table below). This compares to 37% at the opposite end of the emissions scale.

In 2019/20 the annual taxable benefit in kind on 100% electric cars was based on 16% of the list price For electric cars registered from 6^th April 2020, the benefit in kind is 0% of the list price for 2020/21, 1% for 2021/22 and 2% for 2022/23. 

CO2 (g/km)	Electric range (miles)	2020-21 rate (%)	2021-22 rate (%)	2022-23 rate (%)
1-50	>130	0	1	2
1-50	70-129	3	4	5
1-50	40-69	6	7	8
1-50	30-39	10	11	12
1-50	<30	12	13	14

Source ICAEW

• The employer will be due to pay class1 A NIC which is set at 15.05% of the benefit in kind (this is tax deductible).

• The employer can also claim tax relief for the costs of insurance and maintenance.

• In addition to the above, the employer can also provide charging facilities at the company premises free of charge which will be a tax free benefit for employees.

Capital Allowances

A further attractive tax relief for the employer is that, if a new and unused car is purchased rather than leased, they can offset the entire cost of an electric vehicle is tax deductible in the year of purchase. There is clawback of relief for any proceeds received when the car is sold. 

HMRC has shared a handy tool calculator to work out the estimated cost of the vehicle to both the employer and the employee.

Business Mileage Payments

If charging facilities are not available at their workplace an employees can be paid a tax free mileage rate of 4p per mile.

Salary Sacrifice

Given the beneficial benefit in kind rates for electric cars, some employees may benefit from agreeing to a salary sacrifice on order to facilitate the provision of an electric company car.  

How we can help

If you would like help with deciding whether to buy an electric car, the team at Loucas can assist you. Do contact us if you would like any further help or advice in this area.

For more advice, read our article on Buy, HP or lease.

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