If you’d like advice on car allowances or HMRC company car tax, call us on 0207 043 4000 or get an instant accounting quote in just five clicks. Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities. It includes standard accessories, any relevant taxes (VAT, car tax (where appropriate), any customs or excise duty, any tax chargeable as if it were a customs duty) and delivery charges, but excludes the new car registration fee because it’s an administration fee, not a tax. They should not be confused with payments for private use of the car, see paragraph 12.36. In any other case (for example a car with a rotary Wankel engine) the appropriate percentage is: This is subject to adjustments for cars powered by other fuels as shown in paragraph 12.29. If you find a larger discrepancy then contact HMRC for advice. When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling. So, does it pay to go electric? The announcement, which sees company car benefit-in-kind tax rates for zero emission cars in 2020/21 cut to 0% from the previously announced 2% but all other already published rates remaining unchanged for cars registered before April 6, 2020, sees reduced rates for cars first registered from April 6, 2020. Introduced in 2002, company-car tax applies to cars bought by employers for their employees' private use. As a result, employers and employees will make substantial savings on Tax and National Insurance. Hybrid cars do not qualify as electric cars. Don’t include personal or financial information like your National Insurance number or credit card details. For hybrid cars with a CO2 of 1-50g/km registered: before 6 April 2020 New European Driving Cycle, use the ‘electric range’ within section 49.2 on the certificate of conformity. In the past year, sales of electric cars have doubled in the UK, rising from about 9,000 in August 2018 to 17,393 in August 2019. We’ll send you a link to a feedback form. Electric cars are cars that get their motive power from electricity only. As a milestone decision, this is the first opportunity for company cars to be taxed at 0% as a benefit in kind (BIK), helping businesses make the transition to zero emission vehicles and a potentially emission-free future. In 2019/20 the taxable benefit for using a normal company van is £3,430 and the benefit for an electric van is 60% of that figure: £2,058. You may have made an electric car available to your employee for private use during 2018. At DriveElectric we’re pleased that at last, the HMRC has taken notice of the advice from the fleet industry and announced that electric vehicles will have 0% Benefit in Kind company car tax rates from 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 private use only, the cost of electricity used is taxable as a benefit-in-kind If business use only or mixed use, the total cost of electricity used is taxable as a benefit-in-kind. The following adjustments apply from 2011 to 2012. The obvious example in our case is company cars, which are taxed according to the income of the employee. If the car cannot emit CO2 in any circumstances by being driven the appropriate percentage is for 2015 to 2016 – 5%, 2016 to 2017 – 7%, 2017 to 2018 – 9%, 2018 to 2019 – 13%, and 2019 to 2020 – 16%. Use the CO2 emissions ready reckoners to work out the percentage benefit for petrol-powered and hybrid-powered company cars. Switching to an electric car can bring significant tax benefits for businesses and this is set to get even better from April 2020. The Vehicle Certification Agency supplies CO2 (and other emissions) data. The amount to be deducted is calculated in exactly the same way and with the same limit as for other cars (paragraph 12.16). The tax charge is known as the Benefit-in-Kind (BiK). Don’t worry we won’t send you spam or share your email address with anyone. However, there are tax breaks for drivers of company cars with shorter electric ranges, but they aren’t as generous. 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. Due to their lower tailpipe CO2 emissions, car tax for hybrid cars is generally lower than it would be for a non-hybrid model. Changes to the UK’s company car tax system will mean drivers choosing a pure electric car pay no benefit-in-kind charges from next year. For employers looking into electric company cars, there are now considerable savings to be made. Recently released draft HMRC guidance sheds more light on the tax treatment when an employee charges their own electric car at work, but the treatment of business mileage payments relating to electric cars continues to leave many in the dark.. For the years up to and including 2010 to 2011 the price of a car at Step 3 was restricted to £80,000. Those April changes to benefit in kind taxation were really significant. For electric vehicle owners, it means they will not pay tax next year with 2021/22’s rate set at 1% and 2022/23’s rate at 2% – the previously-announced rate for 2021/22. Pure electric cars will not be subject to any Benefit-in-Kind tax at all for 2020/21 – regardless of when the car was registered. Benefit in Kind for electric vehicles for tax year 2020/21 is 0%. A classic car: When all the above conditions are met, substitute the market value of the classic car for the year less any capital contribution for the amount otherwise carried forward from Step 3 above. For electric vehicle owners, it means they will not pay tax next year with 2021/22’s rate set at 1% and 2022/23’s rate at … Related: Should you offer your employees a company car? Electric cars are exempt from Vehicle Excise Duty – otherwise known as road tax – and for the 2020/21 financial year, beginning 6 April 2020, they're exempt from company-car tax, too. Sections 137 and 141, SI2001/1123, Section 138. From 6 April 2017 where a car benefit is provided as part of optional remuneration arrangements the amount of the benefit treated as earnings from the employment is the greater of the: There’s further guidance about optional remuneration arrangements in Appendix 12. Market values of classic cars may be found in specialist publications, contemporaneous sale documents or insurance details for the car concerned. In this article, we’re going to be discussing HM Treasury’s decision to heavily incentivise the uptake of Batt… Car benefit is calculated in a series of numbered steps (more details start at the paragraphs given). Switching to an electric car can bring significant tax benefits for businesses and this is set to get even better from April 2020. However, the downloaded or printed version of the Vehicle Certificate Agency booklet that was current at the time a car was first registered will provide a useful historical record. Use the car tax calculator to calculate the car tax due for any electric vehicle, or find out more at our car tax microsite. The list price is the price as outlined above on the day before the car was first registered (when the car was new). Prices of electric cars are also expected to fall as the UK moves towards zero tailpipe carbon emissions. If you are thinking of choosing an electric car, or are doing your research to determine if one could work for you, here’s a comprehensive guide to how the tax is calculated for electric company cars. If you’re self-employed and thinking of starting a business, we can help plan ahead and get your accounts in order. These examples illustrate the amount of money employees can save annually if their company car is electric. A car allowance can be more affordable for your company and allows a greater degree of flexibility and choice. Changes are being made to significantly reduce the benefit in kind charges on these vehicles. 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