Go green and minimise your tax bill with electric company cars

Fuel tax

BIK tax is also charged on employer-provided fuel for private use. As electric cars don’t use fuel, there’s no fuel benefit charge at all. Better still, employees using their own electric cars can utilise workplace charging stations without incurring a BIK tax charge, even where the vehicle is used for private use.

To illustrate, an employer provided petrol car in 2021/22, listed at £20,000 with CO2 emissions of (say) 120g/km, would attract BIK tax of £5,600 and a fuel benefit charge of £6,888. An electric car with the same value would attract BIK tax of only £200, and no fuel benefit. A significant difference! 

What if you’re self-employed?

The tax favourable incentives of low emission cars have been in place for self-employed individuals for some years now. Currently, 100% first year allowances (FYAs) are available on brand new low emission vehicles (of less than 50g CO2/km) purchased for business purposes, which effectively reduces your taxable profits by the cost of the car. Any vehicles purchased after 5 April 2021 must produce zero emissions to attract the 100% FYA. Otherwise, relief is given at 18% for CO2 emissions between 1 – 50g/km and at 6% for emissions above this limit.

Why make the change now?

The decision to transition to electric cars is no longer just a matter of social responsibility. In the current circumstances, the demand to keep a social distance while travelling presents a timely argument to switch to low emission cars and avoid public transport, as we look to return to our usual business lives in the coming months. If you’re not ready just yet, you’ve got until 5 April 2022 to consider your options before any further BIK tax increase.

For specialist tax advice tailored to you or your business, please fill out the form below and one of our experts will be in touch to discuss how we can work together.