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The Government is committed to helping increase the number of EVs on the road in order to meet ambitious climate change targets and improve air quality in our major cities.

The way vehicle taxation is structured reflects this priority with a range of incentive

Tax changes from 2020/21

Tax changes which came into effect in 2020/2021 will help to reduce company car tax bills for drivers. From 6th April, fully electric cars will pay no Company Car Tax (CCT) in 2020/21, just 1% in 2021/22 and 2% in 2022/23.

In addition, the government has introduced five new CCT bands for plug-in hybrid cars which emit 1-50g of CO2/km.

Benefit In Kind explained 

Benefits in Kind are benefits which employees receive from their employment but which are not included in their salary or wages. This includes items such as company cars. BIK tax is payable on a company car if it’s available for private use. In nearly all cases this includes journeys between home and work.

How is it calculated?

HM Revenue and Customs calculates that Benefit in Kind is charged based on cash equivalent value of benefit. Typically, employers would submit a P11D form that details any work related, taxable expenses and taxable benefits you’ve received over the tax year, which runs from 6th April – 5th April.

Benefit in Kind may be taxed under PAYE (Pay as you earn) by being offset against personal tax allowances in your PAYE code. If the Benefits in Kind are not included in your tax code for the year when you receive them, the tax may be collected after the end of the tax year.

Car Fuel Benefit Charge

As electricity is not classed as a road fuel, Tesla cars have no fuel benefit charge. That means employees are exempt from paying Benefit in Kind on electricity provided by their employer to charge an electric company car.

The advisory fuel rate for fully electric vehicles has been confirmed by HMRC as 4 pence per mile.

Vehicle Excise Duty

With zero emissions, all EVs cars are exempt from Vehicle Excise Duty. This includes an exemption from the luxury car surcharge from 1 April 2020 until 31 March 2025.

100% First year Allowance (FYA)

In the March 2020 UK Budget, the Government announced that 100% FYA for businesses purchasing low emission cars will be extended until 31 March 2025.

Ultra Low Emission Zones and London Congestion Charge

EVs are able to access Ultra Low Emission zones without paying a noncompliance fee. From 25th October 2021, the cleaner vehicle discount will change so that only battery electric vehicles are exempt from the London Congestion Charge.

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