Introduction

• The Approach to this and all Articles is consistent with our Standard System and Procedure.

Electric Company Car Benefit in Kind

• Fully electric cars were previosuly eligible for a 0 percent Benefit in Kind rate.
• The Benefit in Kind rate rose to 1 percent of the list price in 2021/22 and to 2 percent in 2022/23. 
• This charge covers all the costs incurred by the company in connection with the car, except for the:
  • provision of a chauffeur; or
  • payment by the company of fines, penalties, parking charges, etc, for which the employee is personally liable.
• In addition to the provision of the car, the company can provide further benefits alongside a company car without giving rise to any additional taxable benefits. These include:
  • insurance;
  • maintenance;
  • installation of a charging point at work;
  • installation of a charging point at the employee’s home;
  • provision of a charge card to allow access to charge points; and
  • recharging at work (or in other circumstances where the company has the primary responsibility for paying the supplier).

100% First Year Allowance (FYA) 

• In the March 2020 UK Budget, the Government announced that the 100% FYA for businesses purchasing cars with CO₂ emission not exceeding 50g/km was extended until 31 March 2021. 

Car Fuel Benefit

• As electricity is not classed as a road fuel,
• Electric 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. 

Hybrid Cars

• If your company car has CO2 emissions of 1 to 50g/km, the value of the car is based on its zero emission mileage figure, or ‘electric range’. This is the distance the car can go on electric power before its batteries need recharging.
• Road tax for hybrid cars
  • Low emission hybrid cars will pay a reduced rate in the first year but then will have to pay increasing amounts after that.
  • There’s also another rate that applies to cars worth over £40k. So
  • If the list price of a new hybrid car was over £40,000, you will pay an additional fee for five years from year
  • This applies to all hybrid cars, but not to fully electric cars.
  • The premium supplement for hybrid vehicles over £40k adds £335 to your annual road tax.
  • After five years, the premium supplement is no longer paid.
  • This premium supplement is not applied to fully electric cars.
• Leasing
  • The monthly lease rental payments for vehicles on a lease are usually eligible for corporation tax relief.
  • For fully electric vehicles and hybrid vehicles with CO2 emissions below 50g/km, 100% of the monthly lease payments qualify for tax relief.
• VAT
  • For VAT purposes, you are able to claim back 50% of the VAT on the monthly lease payments. This would be subject to any private use adjustments.
  • For vehicles used for business purposes, VAT on the ‘fuel’ used must be accounted for using the appropriate scale charges.
  • For VAT purposes, HM Revenue and Customs (HMRC) regards hybrid vehicles as the same as petrol or diesel vehicles based on the engine size.
  • HMRC advisory fuel rates.
  • Fuel payments (whether petrol, diesel, or electricity) between the employer and employee for business mileage are accounted for at the prevailing rate.
  • If the employer has incurred VAT on that fuel/electricity for business mileage, it’s fully reclaimable.

Benefit in Kind Table

• The tables below shows future BIK tax bands (also known as company car tax) based on CO2 emissions of your vehicle.
• The BIK bands are set by HMRC and are based on a vehicle’s CO2 emissions. A rate applies to electric or alternative fuel cars that emit zero CO2 emissions.
• If you drive a hybrid car that emits less than 50g/km, the rate is based on the zero-emissions range. This is the distance the car can go on electric power before its batteries need recharging.
• To check the zero-emission range for plug-in hybrids, click here.
• The Government announced in the 2022 Autumn Statement company car tax rates until April 2028.
• The rates for the current tax year are highlighted in bold, below and rates apply to vehicles registered after April 6, 2021.

Capital Allowances Table

Useful Links

• Company Car Benefit in Kind
• 100% First Year Allowance (FYA)
• Plug-In Grant