Company Car Tax on Electric Cars
Electric cars are becoming more popular and more accessible as each year goes by. One of the reasons is that they attract low benefit in kind rates, and can be a really cost-effective option when selecting and then running a new company car.
The government is clearly trying to push drivers and businesses towards investing in the best low emissions company cars through the use of tax incentives and, as a result of government policy, there is now a considerable electric car business tax benefit.
Drivers pay Benefit-in-Kind tax on company cars in line with the vehicle’s emissions. But, at a time when there is currently a 4% surcharge for choosing a diesel car, there is a potential tax benefit for any drivers opting to go for an electric company car.
Electric car benefit-in-kind (BIK) tax treatment is significantly more beneficial than that for conventional engine cars, especially diesels.
If you are thinking of choosing an electric car, or are doing your research to determine if one could work for you, here’s a comprehensive guide to how the tax is calculated for electric company cars. Read on to understand the benefit it kind tax regime, so that you know how much you’ll pay, and can decide if an electric vehicle would suit.
Do you pay company car tax on electric cars?
In 2019, the Government announced that company cars producing no CO2 emissions would attract a zero percent Benefit-in-Kind tax rate from April 2020, meaning you would pay no company car tax on a pure electric car for that tax year.
The zero percent rate also applied to vehicles, first registered from 6 April 2020 and producing between one and 50g/km of carbon dioxide, that are capable of more than 130 miles on battery power alone.
These rates would then increase to 1% for 2021/22 and 2% for 2022/23 for vehicles registered after 6th April 2020.
In the March 2020 Budget, the chancellor announced that the BiK rates for all company cars for the tax years 2023/2024 and 2024/25 tax year would remain at the 2022/23 levels.
What is the tax on electric cars?
Up until the 2024/25 tax year, two tables of benefit in kind rates will be in operation; one for vehicles registered before 6th April 2020 and one for vehicles registered after that date. The full benefit in kind tables can be found below: