Company cars are an expensive option for a salary package and I can’t remember the last time I recommended a company car for the owner of a business. However for some clients, I can see that this is about to change as HMRC will be introducing some attractive tax rates on electric cars.
For several years now the benefit in kind associated with company cars has increased each year with the cheapest rates available for cars having zero or very low emissions. Even in the current tax year ending 5 April 2020 an electric car will have a CO2 percentage of 16% applied to the list price to calculate the taxable benefit.
Incentives for Electric Cars
From 6 April 2020 electric (zero emission) cars will have a tax benefit percentage of 0% which means there will be absolutely no company car tax. It will then increase by 1% per annum. In addition to this there is no benefit for a company to provide electricity charging points unlike the huge tax charge for providing fuel for private use. There is also a tax advantage to the company as it will receive tax relief on the charging point installation cost until March 2023.
I have summarised below the tax variances between an Audi A4 petrol car and a Tesla for the 2020/21 tax year.
| Audi A4 Saloon 35 TFSI S Line 150PS | Tesla Model 3 Standard Range (254 miles) | |
| List Price | £32,460 | £40,840 |
| CO2 Emissions | 137 | 0 |
| Benefit Percentage for 2020/21 | 30% | 0% |
| Taxable Car Benefit | £9,738 | 0 |
| Taxable Fuel benefit (Based on 2019/20 fuel benefit charge) | £7,230 | 0 |
| Tax Payable for Basic Rate Taxpayer | £3,394 | 0 |
| Tax Payable for Higher Rate Taxpayer | £6,787 | 0 |
| National Insurance cost to Company for providing Car | £2,342 | 0 |
| Tax savings from capital allowances in the year of purchase on a brand new car (assuming you paid full list price less £3,500 government grant for electric car) for a Company paying Corporation Tax at 19% | £370 | £7,095 |
When it comes to tax the electric car from April 2020 certainly becomes a more attractive company car proposition than a petrol alternative. In addition there are some other benefits:
1. Zero road tax if you buy an electric car with a list price of less than £40,000.
2. 100% discount for the London congestion charge
3. Low running costs
I appreciate that some people will drive hundreds of miles a week but with electric cars now having realistic ranges of over 200 miles it really does make you think that electric is a viable option.
I was in Edinburgh a couple of weeks ago and I found myself walking into the Tesla show room and after the government grant the model 3 will cost you less than £40,000. With a range of approximately 250 miles this would last me the working week in most cases. Even if I were travelling further the car is able to let you know in real time where available charging points are and service stations now have super-fast charging points that charge the battery from 20% to 80% in 30 minutes.
To summarise I am seriously impressed and charging points will only get faster as we move firmly into the era of the electric car.
> Posted by Sean Wiegand
Disclaimer: The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.