Is it time to switch your company cars to electric?

Research by the UN Development Programme has found that two-thirds of us believe Climate Change is a global emergency. To address this, the Committee for Climate Change has set the target of Net-Zero emissions for the UK by 2050.

To meet this aim, the organisation has outlined a need to reduce emissions by 80% by 2035. All car and van manufacturers are to sell zero-emission vehicles only by 2030 and a small proportion of hybrids until 2035.

Low Emission Zones

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. Other Clean Air Zones (CAZ) have been introduced in Bath and will be introduced in Birmingham, Leeds and Oxford later this year. Over 50 authorities are now reviewing schemes across their towns and cities.

Electric vehicles are a key contributor in achieving net-zero. The UK’s new car market fell by around a third in the UK last year, yet sales for electric cars and hybrids rose sharply, equating to 10% of UK car sales.

Concerns about Electric Cars

There have been concerns for drivers considering a move to electric vehicles. Until recently, the battery range has barely reached more than 100 miles. Charging points have not been widely available across the country. And costs have been high. Battery range has now increased to an average of 250 miles, and charging points are becoming more increasingly accessible.

To incentivise company car drivers to go electric, the Government offers extremely attractive benefit-in-kind (BIK) tax rates.

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% taxpayer.

  • For the tax year 2021 – 22, the BIK tax rate has increased to 1% and will rise again to 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.
  • Plug-in hybrid vehicles (PHEV) are being incentivised. These cars have a battery charged externally with a current range of between 20-30 miles and a petrol or diesel engine. PHEVs will be taxed at 13% in the BIK scheme for 2021/22, rising to 14% for 2022/23. Compared to a typical diesel company car with emissions between 110-114g/km2, taxed at 32%, 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 petrol or diesel.

Additional benefits for leasing an Electric Car

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 because you can offset 100% of your lease against taxable profits for an electric vehicle or qualifying hybrid.

No congestion charge!

Electric vehicles are not subject to the congestion charge in London, ULEZ, or CAZ charges as described above.

What are electric vehicle models 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. Volkswagen is leading the way, launching the ID.3 model in 2019 and now the ID.4 later this year. The ID.3 sold more than 212,000 electric cars in 2020.
  • There is an ever-increasing number of desirable 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 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 electric vehicles’ cost. This narrows the gap compared to standard cars. For example, the current VW e-Golf costs including a grant of £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 can 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 over 40,000 connectors and 23,000 devices available across the country. Coverage is strong in London, Scotland and the South West and is increasing elsewhere.

It is essential to know that batteries are warrantied for eight years and 100,000 miles, so unless you drive 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. Do not 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!

 

 

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