Earlier this year, the Government revealed electric vehicles will be exempt from company car tax in the 2020/21 tax year. The lower limit of £100 means that inexpensive accessories which are made available during the period are not included in the benefit charge. Growing your business: Putting your tax relief benefits to work. This growth is likely to continue as more people try to move away from fossil fuels, which is being incentivised by the Government. Benefit In Kind: When does a van become a company car? With electric cars being exempt from this tax for 2020/21, this makes having a company car a much more tax efficient choice for employees than it has previously been. Electric car benefit-in-kind (BIK) tax treatment is significantly more beneficial than that for conventional engine cars, especially diesels. Draft legislation for this exemption was published in July 2018, which can be found together with a policy paper and explanatory note here This is the same as the lowest benefit-in-kind tax on a car with a petrol engine that emits up to 50 grams of CO2 per kilometre. Benefit in Kind for electric vehicles for tax year 2020/21 is 0%. Contact our friendly team today on 0207 043 4000. One is for those driving a car that was registered as a company car after 6 April 2020, and the other is for those registered before 6 April 2020, No matter the registration date, pure electric cars with zero tailpipe emissions and certain plug-in hybrid cars will be taxed by the following BIK percentages (company car tax rates) for the next three tax years. Find the appropriate percentage for the car (paragraph 12.22). If the company reimburses any part (measured or not) of the employee's home electricity bill, that is not a benefit in kind, it is pay, and so section 149(4) does not apply to it. However, in August alone, new owners registered 2,082 of the Model 3 cars, according to data from the Society of Motor Manufacturers and Traders. up to 2009 to 2010 the appropriate percentage is 15% if it’s a car propelled solely by electricity, for example by a battery (from 2010 to 2011 this legislation is repealed and the appropriate percentage in the bullet below will apply), in any other case (for example, a car with a rotary Wankel engine), the appropriate percentage is 32% up to 2015 to 2016 and 37% from 2016 to 2017 onwards, given as part of an arrangement whose purpose was to provide the employee with a materially better car then the normal car, there must be a need in the year to make payments as a condition of the car being available for private use, from 2014 to 2015 the wording of this section changed to make sure that any payment for private use must be paid within the relevant tax year before it can be deducted at step 6, the payments must be specifically for that private use – payments for supplies of services, such as petrol or insurance, do not count, from the 2017 to 2018 tax year, private use payments made before 6 July following the tax year in which the benefit is provided will be accepted as reducing the cash equivalent as long as they meet the conditions described in this section, which is available to more than one employee concurrently, available concurrently for each employee’s private use, for which 2 or more of those employees are chargeable to tax for that year, calculated separately under Section 121 (paragraphs 12.4 to 12.38), and, then reduced on a just and reasonable basis. If during that period the employee is provided with a replacement car, it’s not also charged as a benefit if it’s not: Payments that an employee makes for the private use of the car are deducted from the figure carried forward from Step 6 and can reduce the benefit charge to nil. By making this positive change, HMRC are increasing accessibility to electric vehicles (EVs) and enabling the industry to grow. Planning ahead Employers looking to provide tax-efficient company cars in the future should consider electric cars and hybrid models with a good electric range. Use the CO2 emissions ready reckoners to work out the percentage benefit for petrol-powered and hybrid-powered company cars. Electric cars and employees ... Until 5 April 2018, if an employer provided electricity to charge an employee’s personal car then a taxable benefit in kind would arise. The table represents electric, petrol and diesel related BiK rates. Car tax benefit in kind changes saw extra tax fees scrapped on models purchased under salary sacrifice schemes. The director has a car benefit but no fuel benefit, since electricity isn't fuel. When a company car is made available for the private use, a 'Benefit-in-Kind' (BIK) rate is calculated based on the car's value and its tailpipe CO2 emissions. Taxation of company cars (CCT) 4.1 The provision of a company car that is available for the employee's private use is treated as a benefit in kind (BIK).3 This is known as Switching to an electric car can bring significant tax benefits for businesses and this is set to get even better from April 2020. The price is in either category (b) or (c) and 127(2) of paragraph 12.11, as appropriate, and is calculated on the same basis. If the only car that an employee who holds a disabled person’s badge can drive is one with automatic transmission, the appropriate percentage is calculated using the approved CO2 emissions figure of the closest manual equivalent, which is: The appropriate percentage for every car first registered before 1 January 1998 is based on its engine size, even if (exceptionally) it has an approved CO2 emissions figure. (b) After the last day on which the car is available to the employee. The figures should normally be the same if they relate to the same car and the same year. Hybrid cars do not qualify as electric cars. Condition (a) means that those accessories which are necessarily provided for use in the performance of duties of the employee’s employment are not counted. But you knew that already - I'm tellin' my granny how to … Benefit in Kind (BiK) When a car is provided for an employee by their employer that is available for personal use, the employee must pay … This is compared to a maximum of 37% charged on the least CO2 efficient vehicles. The approved CO2 emissions figure is shown on the Vehicle Registration Document (V5) or Vehicle Registration Certificate (V5C). From 2019 to 2020 onwards, P11D code F should be used if the diesel car meets Euro standard 6d. 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. Planning ahead Employers looking to provide tax-efficient company cars in the future should consider electric cars and hybrid models with a good electric range. No benefit in kind charges for having an electric company car Usually, a benefit in kind charge is applied on company cars and becomes a non-starter (forgive the pun). If a later accessory is added part way through a tax year, its price is included at Step 2 for the whole year. From 6 April 2020, there will be a few changes to P11D forms for Ultra Low Emission Vehicles (ULEVs) such as pure electric and some hybrid cars. The current BIK rates are shown on our company car tax page. It depends where the charging point is located and whether it’s given in conjunction with a company car or a car personally owned by an employee or director. From 2015 to 2016 2 new appropriate percentage bands are introduced (see paragraph 12.27) and the type E code will no longer be used. The list price is the inclusive price published by the manufacturer, importer or distributor of the car if sold singly in a retail sale in the open market in the UK on the day before the date of the car’s first registration. By making this positive change, HMRC are increasing accessibility to electric vehicles (EVs) and enabling the industry to grow. As car benefit arises on cars ‘made available’ these employees are likely to have 2 or more car benefit charges in a tax year. Tax changes which come into effect in 2020/2021 will help to reduce company car tax bills for drivers. Tax charges were cut from 16 percent to zero percent on electric … The benefit in kind value on a £20,000 electric car in 2020/21 will only be £400, costing a higher rate taxpayer £160 in tax – considerably less than the £880 payable in 2018/19. If the normal car is not available for a period of less than 30 days, there is no reduction because the car is not deemed to be ‘unavailable’ during that period. The price of those in category (a) is added whether or not they’re available with the car in the tax year in question. Normally, this means replacing the price of the car which can run on road fuel gas with the (lower) price of the petrol-only equivalent model. 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