Benefits are electric for company cars in 2020

Electric Car
If you’re looking to purchase a company car, tax year 2020/21 is the ideal time to switch to a new electric car
Company car tax liabilities on petrol and diesel cars have grown significantly over the last 6 years.  A typical business driver could be incurring between £300 to £400 a month in additional tax and as such they have become increasingly unpopular.  However, the Government changes to BIK rates in 2020/21 means that for a pure electric car with zero emissions, company car drivers will be taxed at 0%, paying no BIK tax at all.  
 
The effect is significant even on fully electric models.  Take the Audi e-tron 55 quattro 300kW.  It has a list price of £71k and a 40% tax payer would pay a BIK charge of £4,576 in 2019/20 on this car (16%).  In 2020/21 it’s £0 and in 2021/22 it’s £286.  A significant saving.
 
There are also other advantages to consider for electric vehicles
 
  • Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means if the company purchase the car outright it can deduct the full cost from pre-tax profits.  On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.
  • If you lease the car via the company then the lease payments are a corporation tax deducible expense and 50% of any related VAT is recoverable
  • Electric cars are also exempt from the congestion charge tax. So, if your company cars are travelling in areas where clean air zones exist or are about to be introduced, then this also adds to the tax savings of electric driving over the year.  The current congestion tax in London costs £11.50 per day per vehicle between 07:00 and 18:00, Monday to Friday.
  • Fully electric cars have no tailpipe emissions and are therefore still exempt from road tax.   However, some plug-in hybrid electric cars with CO2 emissions less than 100 g/km may need to pay anything from £0-£135 per year depending on the levels of CO2 emission
Of course tax, like everything in life, can change.  BIK rates are published until April 2023 and may rise after this date.

BIK rates for electric vehicles

Cars first registered from 6 April 2020

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

Cars first registered before 6 April 2020

CO2 (g/km) Electric range (miles) 2020-21 (%) 2021-22 (%) 2022-23 (%)
N/A
1
2
1-50
>130
2
2
2
1-50
40-69
5
5
5
1-50
70-129
8
8
8
1-50
30-39
12
12
12
1-50
<30
14
14
14

Full BIK rates can be found here:  https://www.gov.uk/calculate-tax-on-company-cars

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"We will not stop until every car on the road is electric"
Elon Musk
Tesla