Company cars have become less attractive to businesses over recent years primarily due to the increasing Government taxes. However, looking to the future of both vehicles and tax this could become a more beneficial option for your business…if you’re willing to think electric.
From 2020 it may be more cost effective for businesses to offer a company car, if they are electric. Aside from the benefits in terms of capital allowances, from January 2020, the cost of having an electric car to the employee or directors are greatly reduced.
Company cars are taxed based on a benefit in kind (BIK) value. This value is calculated based on the list price of the car, regardless of the age of the car, and the CO2 emission percentage. The BIK value is then taxed as if it were part of the employee’s salary, with the appropriate tax percentage payable by the employee and the company’s national insurance contribution paid by the business.
CO2 emissions are split into 21 emission bands, ranging from vehicles that emit 0-50g/km to vehicles emitting 180g/km or more. The higher the CO2 emission the higher the percentage and therefore the higher the tax.
Fully electric cars have zero CO2 emissions and with the Government set to support this trend from 2020 the BIK percentage will be reduced from 16% to just 2%, allowing for businesses to make a huge financial saving on electric company cars. Also there are very few drawbacks in relation to fuel and the private use of fuel as HMRC have accepted that a company can provide electricity for a company car with no additional BIK.
The difference to your business, based on VW E Golf:
|Car List Price|||||£33,785|||||£33,785|
The taxable benefits will not only be advantageous for your business but also your employees, not to mention the environment!
Other than the potential limitations on the range of vehicles available, there are numerous benefits to having an electric company car. Firstly, your business may be eligible for a grant of up to £3,500 for cars with CO2 emissions of 50g/km or less and if that wasn’t enough, zero emission cars costing less than £40,000 are exempt from road tax.
For more information and to see how beneficial this option could be to your business get in touch with us.