With the government announcing more than £20 million of funding for schemes designed to increase the uptake of electric cars, now is a great time to start considering going electric with your company cars.
Included within the government initiatives is the brand new ‘try-before-you-buy’ scheme which allows businesses to have a free trial of electric vehicles for two months, encouraging them to make the switch to electric cars and vans from diesel fleets. This is a fantastic opportunity to up your company’s ‘green credentials’ whilst saving considerable amounts of cash during these unprecedented times.
Here are five reasons why it pays to go electric with your company cars:
A reduction in company car tax for the employee in the 2021/22 tax yearFully electric cars will be eligible for a 1% Benefit In Kind rate in the 2021/22 tax year, which means that you pay very little company car tax on a fully electric car in this tax year. According to the government’s latest announcements, the Benefit In Kind rate is set to rise to 2% in 2022/23.
This 0% or low Benefit In Kind rate represents a huge saving over some of the Benefit In Kind rates for petrol and diesel company cars which can run as high as 25-37%. You can read more on this topic here.
To illustrate the point, here’s two company cars – one electric and one diesel:
|Tesla Model 3||Volvo XC60 R-Design|
|Benefit In Kind||£484||£19,886|
|Annual company car tax @ 40%* for 2021/22||£194||£7,954|
|Annual company car tax @ 20%** for 2021/22||£97||£3,977|
* If employee’s income is over the basic rate band of £50,270 for 2021/22
** If employee’s income is within the basic rate band of £50,270 for 2021/22
This shows that an employee paying higher rate tax could save over £6k per annum in company car tax by moving to an electric car, which is a significant saving for the employee.
Lower tax for the employer The current very low Benefit In Kind on electric cars also saves on employers’ NI at 13.8%, which is a significant saving for the employer.
On top of that, if a new fully electric car is purchased outright or on hire purchase finance, the business can claim 100% of the cost of the car against profits in the first year, which can significantly accelerate the tax deduction you get for the vehicle.
Whilst you as an employer will not incur the costs for private use, you will still pay costs for business use. Charging an electric car is much cheaper than fuelling a petrol or diesel car. In fact, The Energy Savings Trust worked out that, depending on make and model, filling up 100 miles of range can cost between £4 - £6 using electricity but around £13 - £16 using petrol or diesel.
Electric cars also have much fewer parts than their petrol or diesel counterparts, which means fewer things to malfunction or break, resulting in lower service and repair costs.
Petrol and diesel car prices on the riseThe Department for Transport has recently proposed that petrol and diesel cars could be £1,500 more expensive to purchase under a new "feebate" scheme aimed to boost the take-up of electric vehicles. This is still in the early proposal stages and has not been rolled out, but is worth keeping on your radar.
There are also grants currently available from the government to vehicle dealerships and manufacturers. This means you can get a discount of up to £3000 on the price of brand new low-emission vehicles and up to £350 (including VAT) off the cost of installing a charger at home.
Don’t pay congestion charges Electric cars don’t have to pay the London congestion charge, which will save significant amounts for those who travel into London on a regular basis for business.
Other clean air zones are also appearing throughout the country, with congestion charges appearing in other cities, and it's likely that more cities will look to set up similar schemes. So, if you want to avoid incurring charges for employees entering city and town centres, ultra-low or zero-emission vehicles are the way to go.
Electric Vehicles demonstrate a commitment to Corporate Social Responsibility Being able to show that your business is trying to reduce its carbon footprint and environmental impact is becoming more and more important. Your customers and clients are becoming increasingly knowledgeable and selective when it comes to where they spend their money and are keen to work with businesses that share the same ‘green credentials’ as they do.
This can also work wonders for employee attraction. By using electric vehicles for your company cars, you'll be recognised as a forward-thinking business that cares for the environment and people's health.
More advice and guidance
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