Time for an electric company car?
Oct 11, 2019
If you’ve ever considered opting for an electric company car, the government is trying to persuade you that now’s the right time to make the switch. In a bid to encourage motorists to switch to green vehicles, it has announced that from 2020/21 there will be a zero P11D benefit for all drivers of electric company cars. This is instead of the 2% scale charge that was originally included in Finance Act 2017, and which was due to apply from 2020/21. The legislation for the change will be included in Finance Bill 2020, and it is proposed that the benefit will then change to 1% of list price in 2021/2, and to 2% in 2022/3. Company cars account for almost 6 in 10 new car registrations in the UK each year, so the measures are intended to increase the uptake of fully electric vehicles amongst company car fleets.
Benefit in kind scale charges
This same zero taxable benefit will also apply to those hybrid cars which emit no more than 50 grams of CO2 per kilometre, and which have a range of at least 130 miles using their electric motors. However it will only apply to cars first registered on or after 6 April 2020 – any cars registered before then will have a scale charge of 2%.
So rather confusingly there will be two different sets of benefit in kind scale charges from 2020/21 – one set relating to cars registered before 6 April 2020, and a new lower set of rates for those registered on or after 6 April 2020. And if you’re contemplating buying an electric company car you’re advised to wait until 6 April 2020, as the P11D scale charge for electric cars is currently 16% of original list price for 2019/20!
The government is still reviewing the appropriate percentages for benefit in kind scale charges beyond 2022-23. It claims that it will aim to announce appropriate percentages at least two years ahead of them coming into effect, in order to give employers and employees enough notice.
Although the zero benefit in kind on an electric company car is welcome news, it’s worth bearing in mind that electric cars are more expensive to lease in the first place than a conventional car. Plus their uncertain value at the end of the leasing period is making lessors cautious. So it’s worth checking whether opting for an electric car stacks up financially overall, and not just from a tax perspective.
Advisory Fuel rates
Back in August 2019, HMRC announced a new fuel advisory rate for 100% electric cars. From 1 September 2019 this was set at 4p per mile. But if you have a plug in hybrid car no separate rate has been introduced – instead you need to use the equivalent petrol or diesel rate. These rates are reviewed every quarter.
If you have any queries about the tax implications of using a company car, please contact us and we’ll be happy to help.