Here are some of the reasons that swapping to an Electric Vehicle (EV) makes sense.
Electric vehicles present compelling financial incentives for both business and personal buyers. These advantages encompass a substantial reduction in
- Low BIK (Benefit-in-Kind) taxation for company car drivers,
- lowered employer Class 1A National Insurance Contributions (limited to company cars),
- exemption from the London Congestion Charge,
- exclusion from the London Ultra Low Emission Zone,
- Low VED (Vehicle Excess Duty)
- Right down 100% of the value against tax over the first year.
- No benefit in kind tax for charging your vehicle at work.
- Access to salary sacrifice schemes making car ownership more cost effective.
London Congestion Charge
The London Congestion Charge is a daily charge for driving a vehicle within the charging zone in central London.
The charge is applied between 07:00 and 22:00, 7 days per week.
The daily charge is now £15 per day.
Currently, only vehicles that meet Euro 6 standards and emit no more than 75g/km of CO2 and have a minimum range of 20 miles zero emission will qualify for the 100% cleaner vehicle discount.
This includes Electric vehicles.
For more information: TFL Congestion charge
Ultra Low Emission Zones
For full details go on the low emissions zone
Area: The zone currently covers all areas within the North and South Circular Roads and expanded at the end of August 2023 to all London boroughs
Petrol cars and vans (up to 3.5 tonnes) need to be Euro 4 and Diesel cars and vans (up to 3.5 tonnes)
Euro 6 EV and PHEV cars are exempt from ULEZ charges.
Generally petrol cars from January 2006 and diesel cars from September 2016 will meet the standards with some models introduced beforehand
Vehicle Excise Duty
All EV cars with zero emissions are exempt from Vehicle Excise Duty.
This includes an exemption from the luxury car surcharge from 1 April 2020 until 31 March 2025
For full details go on Vehicle tax rates
Company Car Tax (Benefit in Kind)
The Benefit in Kind (BIK) Tax for EV vehicles is currently 2%.
This can offer a significant saving for an employee.
As a guide a company car driver as a 20% tax payer driving the following cars will pay these amounts per month in BIK.
- BMW 320d M Sport £208pm
- BMW 330e PHEV M Sport £95pm
- Tesla Model 3 £16pm
More information on Benefit in Kind from the government site
100% First Year Allowance (FYA)
As a business the First Year Allowance is claimable for up to 100% of the cost of qualifying low emission and electric cars. This is applicable to new vehicles and cars. This includes previously used vehicles, such as vehicles registered as a sales or service demonstrator by the manufacturer.
This is currently extended to the 31 March 2025
For more information go to HMRC Capital Allowance
Note that when you sell the vehicle you will have to pay back the allowance.We would always advise speaking with your accountant to get the full picture and to make sure its right for your business.
Car Fuel Benefit Charge
As electricity is not classed as a road fuel, you are not charged a fuel benefit charge. This means employees are exempt from paying Benefit in Kind on electricity provided by their employer to charge an electric company car.
Fro more information on see the tax benefits for ultra low vehicle vehicles from HMRC
Advisory Fuel Rates
The advisory fuel rate for fully electric vehicles is currently 9 pence per mile.
This is updated on a quarterly basis.
Class 1A National Insurance Contributions
Class 1A NICs based on the vehicle's P11D value and relevant BiK rate are applicable as determined by the official carbon emissions and fuel type.
For more information on Class 1A National Insurance contributions