A recent Opinium poll stated that 63% of respondents said we are in the middle of a climate emergency. To address this, the Committee for Climate Change has set a target of Net Zero emissions in the UK by 2050 and is urging for zero car emissions by 2035.
Transport for London introduced its Ultra Low Emission Zone (ULEZ) in April 2019. This charges a daily rate for entering the zone for any vehicle that does not meet the latest emission standards. Further Clean Air Zones (CAZ) will be introduced in Birmingham, Leeds and Oxford later this year and over 50 authorities are now reviewing schemes across their towns and cities.
Electric vehicles are a key contributor in achieving net zero. New vehicle registrations were down 2.14% in 2019 but sales of electric vehicles increased by 144%.
However, there have been concerns for drivers considering a move to electric vehicles. Until recently, battery range has barely reached more than 100 miles. Charging points have not been widely available across the country. And costs have been high.
To incentivise company car drivers to go electric, the Government is offering extremely attractive benefit-in-kind (BIK) tax rates.
So is now time the time to switch? And do those concerns still apply? Let’s look at the facts:
What are the tax benefits of electric vehicles?
Company cars are taxed based on a percentage of their total P11d value. This percentage is based on the car’s published CO2 emissions to calculate how much tax you pay. This is also affected by whether you are a 20% or 40% tax payer. So what is changing in the new tax year?
- The UK Government announced a major change to company car benefit-in-kind tax rules in July 2019. From April 6th 2020, all electric vehicles will enjoy a zero BIK tax rate, increasing to 1% in 2021 and 2% in 2022. The same rate will apply for any hybrid vehicle with net emissions of less than 50g/km2 and a battery range of at least 130 miles. For more details, click here.
- Even plug-in hybrid vehicles (PHEV) are being incentivised. These cars have a battery that is charged externally with a current range of between 20-30 miles, as well as a petrol or diesel engine. PHEVs will be taxed at 12% in the new BIK scheme. Compared to a typical diesel company car with emissions between 110-114g/km2, taxed at 31%, the savings are considerable.
Electric vehicle running costs
- Running costs are much lower than the traditional combustion engine cars. Electric vehicles cost between 2-3p per mile, a typical diesel company car 9-12p per mile, three to four times more. Servicing is much cheaper. With far fewer moving parts, servicing and repair is less than half of what you will spend on a petrol or diesel.
- If you lease your cars, there are additional benefits. Whilst the purchase price of an electric vehicle is generally higher than standard vehicles, residual values (the projected value of the vehicle at the end of its contract) are increasing all the time. This makes leasing deals competitive against standard cars, made even more attractive by the fact you can offset 100% of your lease against taxable profits for an electric vehicle or qualifying hybrid.
- Electric vehicles are not subject to the congestion charge in London, ULEZ or CAZ charges as described above.
What electric vehicle models are available?
The number of models in the electric market has been low with Nissan, Renault, BMW and Tesla the only manufacturers who have really embraced the sector. But 2020 is the year when electric vehicles become mainstream. Volkswagen are leading the way, launching the ID.3 model later this year. They have increased production from 25,000 EVs in 2018 to over 500,000 in 2020.
There are an ever-increasing number of very attractive electric vehicles available with ranges of 250 miles or more. Look at the Tesla Model 3, Jaguar I-Pace, Audi e-Tron, Mercedes EQC, BMW i3, Nissan Leaf, Renault Zoe or What Car’s ‘Car of the Year 2019’, the Kia e-Niro, to name a few.
What do I need to consider when buying an electric vehicle?
The Office of Low Emission Vehicles (OLEV) offers a £3500 grant to reduce the cost of electric vehicles. This narrows the gap compared to standard cars. For example the current VW e-Golf costs including grant £27,575 whilst a 1.5TSi GT equivalent costs £26,635.
Running out of battery charge used to be the biggest worry with electric vehicles. But ranges are extending as battery technology improves. Now, the bigger concern is where to charge. If you have the capacity to do so, it is worth installing chargers at your workplace. The OLEV Workplace Charging Scheme can subsidise the costs – see more.
You can also help employees install home charging points. Many businesses are offering interest free loans to their staff, whilst others pay the cost, again enjoying a grant of up to £500 for installation.
There is still concern about the number of charging points available when out and about. There has been rapid growth, with nearly 30,000 points available across the country. Coverage is strong in London, Scotland and the South West and is increasing elsewhere.
It is important to know that batteries are warrantied for eight years and 100,000 miles so unless you are driving huge distances or intend to keep your cars for longer than that, you have little to worry about.
By going electric, your company can shout loud your green credentials. Don’t underestimate how important this will be in years to come.
Need more help?
We are here to help you. So if you think now is the time to consider an electric company car, let us do the maths to ensure it adds up financially. Of course you may think saving the planet is worth a few more pounds anyway!