Summary of Company Car Tax for Electric Cars
This post sets out a summary of electric car tax including Benefit in Kind as per the Budget 2017
What taxes are payable on company electric cars?
Company car tax rules encourages employers and company car drivers to choose electric vehicles (i.e. vehicles with lower CO2 emissions).
Company car tax for electric cars and hybrids consists of 2 aspects:
- Tax the company must contribute.
- Tax the employee must pay
What tax do companies have to pay on electric cars?
When a company provides an electric vehicle or PHEV to their employees for private use they have to pay company car tax the same as for any other vehicle.
This company car tax is calculated using the car’s “P11D value” (the value of the car including VAT, delivery and any extras) as well as the CO2 emissions produced by the vehicle.
A “P11D” form is filled out by the employer listing the employee benefits received in the year which is then submitted as part of the end-of-year expenses return to HMRC.
What tax does an employee have to pay?
When a vehicle is provided by a company to an employee for private use, this creates a taxable Benefit-in-Kind (BIK).
BIK is when employees receive perks, other than basic salary, as part of their remuneration package.
How is Benefit-in-Kind (BIK) calculated?
BIK is taxed according to your income tax banding. In order to work out the BIK tax an employee has to pay, you need to calculate the value of the benefit in kind:
P11D value x BIK Band = BIK value
*For example, a Nissan Leaf n-Connecta 40kWh has a P11D value of £31,335 and emits 0g/km of CO2, putting it in the 13% BIK rate (percentage banding based on its CO2 emissions).
Therefore, the BIK value is £31,335 x 13% = £4,074
To get the amount your company car will cost you in tax per year, you then multiply the BIK value by your income tax banding (20-45%):
So for a person earning up to £34,500 in the UK (excluding Scotland) the calculation would be £4,074 x 20% = £815 payable per year
For a person earning between £34,500 and £150,000 in the UK (excluding Scotland) the calculation would be £4,074 x 40% = £1,629 payable per year
You can also calculate this by using the HMRC’s company car and car fuel benefit calculator.
BIK Rate for electric vehicles (EV)
Company electric car tax for electric vehicles is currently set at the BIK rate of 13% and this will increase in 2019-20 to 16%.
However it will drop dramatically from April 2020 to just 2%. This means the Nissan Leaf taxation as above would drop to £125 for a lower rate tax payer and £250 for a higher rate tax payer!!
BIK Rate for Plug-in hybrid (PHEV)
Some plug-in hybrid (PHEV) company cars are also rewarded for their lower CO2 emissions as they still fall under the lower band 0-50g/km (Audi Q7 e-tron) and therefore receive a reduced BIK rate by at least 4% compared to the 51-75g/km.
Company Car Tax BIK Rates 2018-20:
|Vehicle CO2 emissions||2018-19||2019-20|
The rates shown are for April 2016 to April 2018 as originally confirmed in the UK Government’s 2015 Budget.
Company Car Tax BIK Rates 2020-21:
In April 2017 the Government announced fifteen new bands which are set out below (showing 2019/202 for comparison).
The table shows that the 2% rate remains for zero emission EVs, but there is a sliding scale for PHEVs according to the range of the car on battery. The Government are clearly encouraging PHEVs to have a greater range on electric.
|Car (g/km of CO2)||Appropriate percentage from April 2020||Appropriate percentage (2019/2020)|
|1 – 50|
|Car with electric range of 130 miles or more||2%||16%|
|Car with electric range of 70-129 miles||5%||16%|
|Car with electric range of 40-69 miles||8%||16%|
|Car with electric range of 30-39 miles||12%||16%|
|Car with electric range of less than 30 miles||14%||19%|
|70-74||19%||19% (up to 75g/km)|
*Add 3% for diesels up to a maximum of 37%
NB: This article does not constitute taxation advice and its contents should always be checked against latest HMRC Rules and advice sought from a Chartered Accountant.