Why should companies make
the move to electric cars?
The UK’s net-zero carbon strategy is rightly focusing minds in a way we’ve never witnessed before and this is showing through increased demand for electric battery company cars.
Pure-electric cars currently share 11.6% of the UK’s new car market and are poised to make up one in six new cars on the roads this year. This will undoubtedly accelerate as the charging infrastructure grows.
At Azets, we are receiving numerous requests from business owner clients, keen for advice on how best to use the current tax incentives to help them retain key staff and consider the provision of an electric vehicle as part of the employee reward package, as a viable alternative to a simple pay-rise. We believe this trend will continue in the current economic environment. In addition, many businesses are also examining the environmental and regulatory considerations of providing electric vehicles.
As the eco revolution accelerates, what are the benefits
for switching to electric company cars?
- The option to reward staff with a low government-approved tax ‘benefit in kind’ (BIK) through zero carbon or low carbon vehicles. Income tax, payable by the employee, and Class 1A NICs, payable by the employer, are due on the ‘cash equivalent’ of the benefit.
- There is the perception aspect to consider these days – pulling up to a meeting in a diesel car may leave customers wondering if your company is practising what it preaches.
- From a regulatory side – companies can pre-empt any bans on diesel and petrol vehicles in certain locations. It may only be a matter of time before diesel and petrol cars are prohibited from travelling in ‘smog cities’. Large cities are now introducing charges for entering town centres for some vehicles, and it is worth bearing in mind that the government has announced new proposals which would see more than 50% of all new cars sold to be fully electric by 2028, just six years away.
- Diesel and petrol costs are at record highs. (See our example of below of a typical Benefit in Kind cost savings).
- Conventionally fuelled vehicles are expensive for both employee and employer and significantly limited the company car proposition – electric vehicles, and to a lesser extent, hybrid vehicles, provide significant advantages in this regard.
Example EV vs ICE BIK comparison
If you have any queries regarding company cars and the options available, or would like to discuss any further employment tax matters, please get in touch with your usual Azets contact or a member of our specialist Tax team.