1st Floor, Audit House, New company car tax rates that are coming into effect from April 2020 will result in the rate of company car tax available on fully Electric Vehicles (EVs) reducing from 16 per cent to zero per cent. Company Car Tax (Benefit in Kind) From 6th April 2020, both new and existing Tesla cars will be eligible for a 0 percent BiK rate for the 2020/21 tax year. Third and finally, there’s the driver’s own tax rate to take into consideration. To explore the financial benefits of choosing an electric company car, we first need to understand exactly how company car tax is calculated. Sole traders who buy cars for business and private use can only claim the business portion of the writing-down allowance. Expenditure on the acquisition of new and unused electric vehicle charging points on or after 23 November 2016 also qualifies for 100% first year allowances. In his March 2020 Budget, Chancellor of the Exchequer Rishi Sunak confirmed that motorists buying electric cars would continue to benefit from the Plug-In Car Grant (to 2022-2023), but it would reduce from £3,500 to £3,000, and cars costing £50,000 or more would be excluded. Electric vehicles can also help your organisation meet climate change targets by lowering CO2 emissions and contributing to an increase in air quality. Claim capital allowances so your business pays less tax when you buy assets - equipment, fixtures, business cars, plant and machinery, annual investment allowance, first year allowances As a result, employers offering staff brand new electric cars at a reduced rate can, in turn, benefit from reduced NI contributions. We explain what all the buzz is about, by breaking down the benefits of ultra-low emission vehicles for business. Changes in emissions regulations has resulted in the removal of BIK (benefit-in-kind) tax on employees who drive EVs (electric vehicles) as a company car. Fuel Duty 1.1 Fuel duty is paid on each litre of road fuel purchased (or on each kilogram in the case of gases). However, with ultra-low emission vehicles, the perks are now considerably greater. She details capital allowances, benefits-in-kind, the encouragement of hybrids, OpRA, leased cars, electric vans and the cost of charging – as well as the potential of free charging at work. Thanks to recent significant developments of the ultra-low emission vehicles market and its accompanying incentives, including company car tax relief and capital allowances on electric cars, the tax benefits are only growing. BIK tax payable by a 40% rate taxpayer = 2,240. Registered office is: 457 Southchurch Road, Southend-on-Sea, Essex, SS1 2PH, © 2018 TBL Accountants Ltd. All rights reserved. The tax break that could save you 40% on an electric car: SIMON LAMBERT on how your employer could help you drive for less. Indeed, it. From October 2021, the Ultra-Low Emission Vehicle Zone is set to expand considerably from Central London, so if you regularly drive in London and only have a plug-in hybrid at present, 2020 is the perfect time to make the switch to a ULEV. This is compared to a maximum of 37% charged on the least CO2 efficient vehicles. All Electric Cars Pay Zero Company Car Tax in 2020. From 6 th April, fully electric cars will pay no Company Car Tax (CCT) in 2020/21, just 1% in 2021/22 and 2% in 2022/23.. For a company, that same £30,000 car would save £5,700 in Corporation Tax. Third and finally, there. There is an exception to this rule though. More than half of all cars are registered to businesses on UK roads and as companies begin to wake up to the cost savings they can bring, UK fleet managers are starting to think about the switch to electric . TBL Accountants is the trading name of DCP Accountants LLP. BIK tax payable by a basic rate taxpayer = £1,120. The second is the vehicle, s BiK rate -  a percentage figure based on the car, s fuel type and emissions level. As the owner of your business though, even these savings pale into insignificance compared with the savings you can make through the First Year allowance. This relief will expire on 31 March 2019 for corporation tax, and 5 April 2019 for income tax. Second hand and electric cars with emissions below 110g/km can claim 18%. Employees can drive an electric car in exchange for a portion of their gross salary — that is, before Income Tax and National Insurance have been taken off — resulting in a significant net saving of up to £300 per month. If more rules get written (or rewritten) for electric cars, it will bring forward the day they find a way to add fuel tax and full rate VAT to the electricity that is used. Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net The average petrol or diesel vehicle has a BiK rate of 20 to 37 percent. Again, electric and hybrid cars have the same entitlement to this tax relief as petrol and diesel vehicles despite being cheaper to power. Use the car tax calculator to calculate the car tax due for any electric vehicle, or find out more at our car tax microsite. Pure electric cars will not be subject to any Benefit-in-Kind tax at all for 2020/21 – regardless of when the car was registered. Capital allowances on electric cars. Also, electric vehicles have fewer moving parts that are susceptible to damage, so the maintenance requirements are lower and less costly than regular vehicles – another point to consider when shopping for a new company vehicle. Government has published updated Company Car Tax bands up to 2023, with Electric Vehicles exempt from tax in 2020. For cars contract-hired by the business with a CO 2 output of 110g/km or below, there is no disallowance. Indeed, it’s usually more cost-effective to buy the car personally and claim your mileage from the business instead. Different levels of Vehicle Registration Tax (VRT) reductions apply to these vehicle types: Hybrid electric on first registration: a vehicle powered from a combination of an internal combustion engine and an electric motor. TBL Accountants can help. Company car tax rates set to change in April 2020. When the lowest BiK bracket falls to just 3% in 2021, a highly efficient £35,000 vehicle would be setting you back just £210 in tax. The tax rules for ultra low emission company cars are set to change from 6 April 2020 making the purchase of an electric vehicle potentially more attractive for a business. Electric company car tax. With the ban on the sale of new petrol, diesel cars and hybrid vehicles now brought forward from 2040 to 2035, it’s inevitable that many of us will flick the electric switch sooner rather than later. This relief will expire on 31 March 2019 for corporation tax, and 5 April 2019 for income tax. a zero per cent company car tax rate being introduced for the 2020-21 tax year; company car tax rates of one per cent and two per cent in the 2021-22 and 2022-23 tax years respectively. Taxable benefit in kind: 28% x 20,000 = £5,600. Meanwhile, plug-in hybrids and other electric vehicles that emit 1-50g of CO2/km fall under five new tax bands from 2020/21. Because of the tax benefits of electric and hybrid cars this means Tom and the company can potentially save tax and National Insurance of £10,103 overall. For small businesses, there’s now an even greater incentive to invest in electric vehicles – electric car tax relief. This means with electric cars, you can deduct the full cost from your pre-tax profits. Purchasing a van through a limited company Vans are classified as plant and machinery for tax purposes. Second hand and electric cars with emissions below 110g/km can claim 18%. For owners of small businesses, taking out a company car can prove false economy - often creating more personal tax liability than it saves on the company’s corporation tax bill. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year. 1,000 in tax (0.2 x 0.25 x 20,000) each year of ownership. OC417557. Until 1 April 2021 a brand new low or zero emission car can qualify for a 100% first-year allowance (FYA) if its CO2 emissions are no higher than 50g/km. Sales of plug-in hybrid cars have risen by 984% from March 2014 to March 2015, and sales of electric vehicles in 2015 are predicted to reach 30,000. For example, in the current tax year, 2018-19, electric or hybrid company cars that emit 50g/km of CO2 attract a BIK scale charge of 13% of the vehicle’s P11D value. Due to their lower tailpipe CO2 emissions, car tax for hybrid cars is generally lower than it would be for a non-hybrid model. Government has published updated Company Car Tax bands up to 2023, with Electric Vehicles exempt from tax in 2020. 28 February 2020. With the cost of the vehicle able to be claimed back against your Corporation Tax bill in year one, a £ 35,000 investment in an electric vehicle would yield a £ 7,000 saving in tax relief. This relief will expire on 31 March 2019 for corporation tax, and 5 April 2019 for income tax. With everything from tax breaks and congestion charge exemptions to Government grants available, the eco-conscious consumer can now make an economical choice of transportation that benefits the environment as well as their finances. For example, in the current tax year, 2018-19, electric or hybrid company cars that emit 50g/km of CO2 attract a BIK scale charge of 13% of the vehicle’s P11D value. Tax changes which come into effect in 2020/2021 will help to reduce company car tax bills for drivers. A) Taxes applicable to all ULEV users 1. For those driving in London, electric vehicles are also exempt from the Congestion Charge. Billericay, Some BIKs are taxed and some are not; there are complex rules around each type of benefit and circumstantial considerations that HMRC take into account before deciding whether a BIK is taxable. Other benefits: The UK Government has recently defined vehicles which have CO2 emissions below 75g/km as Ultra Low Emission Vehicles (ULEV). At the time of writing, hybrid and electric vehicles in the lowest emissions bracket carry a BiK rate of 13%, so for the same cost-price of £20,000 you’d pay £520 p/a in tax. In this article, we’re going to be discussing HM Treasury’s decision to h… | Sitemap | Terms and Conditions | Trading Terms and Conditions | Use of Cookies | Privacy Policy, £500 towards the cost of the home charging unit. Not only are they kinder to the environment, but they’re also cheaper to run. Government grants are available towards the cost of a new electric/plug-in car (or van), as long as it meets certain conditions. So, if the car costs £20,000, the BiK rate is 25% and you’re on the basic tax rate of 20%, you’ll pay £1,000 in tax (0.2 x 0.25 x 20,000) each year of ownership. Electric car benefit-in-kind (BIK) tax treatment is significantly more beneficial than that for conventional engined cars, especially diesels. Electric and hybrid vehicles. Secondly, as electricity is not classed as a road fuel, ultra-low emission vehicles have no fuel benefit charge. Please get in touch with our team for more guidance on Company Car Tax, Benefits in Kind and more. From 2020, drivers with diesel company cars will also have to pay a 4% tax surcharge unless their car meets new RDE2 standards. At the time of writing, hybrid and electric vehicles in the lowest emissions bracket carry a BiK rate of 13%, so for the same cost-price of, Of course, in reality, hybrid and electric vehicles are somewhat more expensive to buy - but even a, 35,000 EV would cost you less in tax than the, Over the coming years, those savings will get far more significant too. Summary of Electric Car Tax Benefits. Sole traders who buy cars for business and private use can only claim the business portion of the writing-down allowance. Benefits in Kind are the benefits that employees or company directors receive from the company they work for, which aren’t included in their salary or wages. Electric car benefit-in-kind (BIK) tax treatment is significantly more beneficial than that for conventional engined cars, especially diesels. Diesel cars will continue to be subject to the 4% premium on the above rates, but those meeting the latest RDE2 rules on nitrogen oxide emissions will be exempt from this.. From an individual taxation liability perspective, someone that choices an electric vehicle over a combustion-engine equivalent will be subject to much less tax than they would otherwise. This means that employees don’t have to pay Benefit in Kind on the electricity their employer provides them to charge an electric company car. It seems that suddenly they are popular, everywhere and silently taking over the company car market. To find out more about the first year allowance and how to claim it, just give our company car tax experts a call on 0121 667 3882 or email us on info@informaccounting.co.uk, Last updated: Since 1st April 2018, cars emitting 111 g/km or more of CO 2 have been subject to a 15% tax disallowance on the amount of the rental that can be claimed against the business’ profits. Business tax* : For fully electric vehicles you can usually use the full cost of the electric car to reduce your business tax. In addition, the government has introduced five new CCT bands for plug-in hybrid cars which emit 1-50g of CO2/km which will … Over the coming years, those savings will get far more significant too. Car tax band: 28% - based on level of emissions and cost. With these huge tax breaks for both business and driver, plus numerous other benefits of, (including reduced road tax, congestion charge exemption and a Plug-in Grant of up to, s not hard to see why small business owners should be steering towards an electric car, The first factor is the cost price of the car (referred to as the P11D value). Those driving electric cars or cars with a good electric range will see their tax bill drop from 2020/21. A change being driven by the rapid rise in electric and hybrid vehicles. The Government has cut the plug-in car grant and abolished Premium Road Tax for electric vehicles, as part of the Budget 2020. Mileage Allowance Relief (MAR) - electric and hybrid cars are treated in the same way as petrol and diesel cars. When the lowest BiK bracket falls to just 3% in 2021, a highly efficient, 35,000 vehicle would be setting you back just, With the cost of the vehicle able to be claimed back against your Corporation Tax bill in year one, a, 35,000 investment in an electric vehicle would yield a, 4 Emmanuel Court Reddicroft Sutton Coldfield West Midlands B73 6AZ, Tax-free childcare available on school holiday clubs, Making Tax Digital for VAT- what records must be kept digitally, Paying voluntary Class 3 National Insurance Contributions. On top of this, those with new ultra-low emission vehicles (less than 50g/km CO2) are eligible for a £500 grant towards the cost of installing a home charging unit, meaning you can power up at work and at home. 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