Electric Vehicles (EVs) are the current hot topic. Fueled by the guilt that is laid on us about the effects of human damage to the planet, and the climate crisis. Then there’s the government’s target to phase out the sale of all new petrol and diesel cars by 2040, and for most cars to be zero emissions by 2050.
No wonder business owners are asking, how much will an electric car be as a company car? Are there any benefits? What is the best option in the long run?
The Government is clearly focused on encouraging more people to drive electric. The range of electric cars available from vehicle manufacturers is increasing and the mileage range on a single charge is also increasing all the time thanks to battery technology getting better. The charging infrastructure is improving but its still limited in the more rural locations.
Electric vehicles for more drivers are becoming a practical option, and for company drivers that want to drive one, the tax benefits will be a great incentive.
Let’s look at those tax benefits.
Benefit in kind (BIK) rates on an electric vehicle are low or non-existent so it can be a cost-effective option when running a new company car. Drivers pay Benefit-in-kind tax on company cars in line with the vehicle’s emissions. There is currently a 4% surcharge for choosing a diesel car, but it offers a potential tax benefit for any drivers opting to go for an electric company car.
Is an electric company car liable for Company car tax?
From April 2020 the government brought in a zero percent Benefit-in-Kind tax rate on company cars producing no CO2 emissions, meaning you would pay no company car tax on a pure electric car for that tax year.
The 0% rate also applied to vehicles first registered from 6th April 2020 producing between 1 and 50g/km of carbon dioxide, that are capable of more than 130 miles on battery alone. The rates would then increase to 1% for 2021/22 and 2% for 2022/23 on vehicles registered after 6th April 2020. The chancellor also announced that the BIK rates for all company cars for 2023/24 and 2024/25 would remain at the 2022/23 rates.
So, what is the tax on electric cars?
Two tables of Benefits-in-kind will run up until 2024/25 tax year. One for vehicles registered before 6th April 2020 and the other for vehicles registered after. These tables are below.
All diesel cars (except those that meet the latest RDE2 rules on Nitrogen oxide emissions) will be subject to the 4% premium on the above rates.
So already you are starting to see that someone who chooses an electric vehicle over a standard combustion engine equivalent will be subject to much less tax.
Examples of electric car tax benefits
Here, we have done an illustration to compare an electric car Benefit-in-Kind to an equivalent Diesel car
Costs of running an electric car
The running costs of owning an EV are also favorable. Electric vehicles provide real benefits in terms of fuel and maintenance savings. The average range on a single charge can exceed 150 miles. But word of caution, you will pay a premium on charging up if you are away from home.
We have compared the costs of similar BMW’s to see if there are benefits of running an electric vehicle day to day.
Cost
Electric Cars are more expensive to purchase. The battery packs required for each vehicle add thousands to the price, and without many buyers, there is limited effect on economy of scale. There are government incentives, but it still leaves you with a hefty upfront cost. However, this cost becomes less important when you consider the resale value remains high, so the cost of owning or financing an electric vehicle is lower.
Fuel
Making use of grants for installing a home charger system, a typical 7kw home charger costs £322, which is somewhere near the equivalent of five tanks of fuel, so let’s say 2500 miles of motoring in an average petrol car. After this you will start to see the savings. An overnight charge is roughly 6 hours and costs approx. £5.60. This will give you a range of about 140 miles.
- Over 10,000 miles, a Nissan Leaf would cost £410 in electricity, or 4.1 pence per mile, assuming an energy tariff of 14 pence per kilowatt hour.
- A Nissan Pulsar2 DiG-T Acenta costs £1,300 in petrol, or 13p per mile, assuming a litre of unleaded costs £1.22.
- The gap narrows if you choose the diesel Pulsar. It costs £960 to fuel over 10,000 miles, or 9.6 pence per mile.
Tax
Current road tax rules state, cars that do not produce any exhaust emissions escape road tax. Only fully electric cars or a small number of hydrogen models meet this requirement.
The cleanest petrol cars such as the Suzuki Celerio 1.0 SZ3 Dualjet attract a road tax of £100, rising to £140 from the second year.
Depreciation
The amount a car loses over time has an impact on the cost of finance. Electric car depreciation used to be steep, but thanks to better technology and performance, combined with declining appeal for diesel cars, they are improving.
In round figures this means that after three years and 30,000 miles, an electric car is now worth 50% of its new price, a petrol car 48% and a diesel, 45%. The situation was exactly the reverse a year ago. In fact, a used Nissan Leaf has risen in value by 20% in the past 12 months.