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Company car drivers want electric cars

Some 70% of UK employees think their employers should offer electric company cars, and two-thirds would be happy to drive one...

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Employees are keener than ever for their employers to take action on environmental issues, according to research by Go Ultra Low, the joint government and industry organisation to promote electric vehicles. 

It found that 70% of employees want their companies to offer them electric vehicles (EVs) as well as more conventionally powered company cars, and that 63% of people would choose an EV as a company car if it was an option. The reduced running costs of EVs were cited as the most appealing factor of 60% of company car drivers and environmental benefits were the most important aspect to 53%. 

The research was carried out soon after the Government reduced the benefit-kind (BIK) tax rate for pure electric cars from the standard rate of 16% to 0% in April 2020. This change could save company car drivers more than £19,000 in BIK tax over three years if they chose an electric Peugeot 208 rather than a 1.2 petrol model. 

However, only 25% of employees knew about the changes to BIK tax, according to the survey, but once they were made aware of it, 42% agreed that it was a positive way to encourage the take-up of EVs.  

2020 Skoda Superb iV charging

Employees are also keen to have EV charging points installed at their workplaces; 30% of those surveyed think this would be a positive move, and 31% would like to see EV carpooling introduced. 

Poppy Welch, head of Go Ultra Low, said: "Everyone is trying to be that little bit more eco-friendly right now, but it can be tricky when it's out of your hands. Our research shows that EVs offer a popular solution for companies looking to reduce their environmental footprint and satisfy their workers' concerns.

“Recent changes to BIK tax means EVs offer low-hanging fruit to employers looking to enhance their company’s green credentials. From their reduced environmental impact to the savings you can make on fuel, tax and maintenance costs, EVs bring significant benefits,” she added. 

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Company car tax explained

The idea of being able to drive something brand new without any initial outlay – or the need to pay for insurance or maintenance – might sound like a dream come true, but you need to go in with your eyes open.

If your job demands you spend a lot of time on the road, then chances are you'll automatically be supplied with the company's standard model (common options include the Ford Focus and Vauxhall Astra), but you may also be offered a wider choice.

Some employers will give you the option to 'upgrade yourself' by letting you make a cash contribution to the car, or you could get a rebate if you take something cheaper.

However, even if you're a senior executive, the list of new cars available may incorporate restrictions on CO2 emissions or safety ratings to help keep down leasing costs.

Things are a lot more complicated than they initially look, then, but don't worry; we've got everything you need to know.

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How is company car tax calculated?

For most company car users, the biggest downside is the tax to be paid for the 'benefit' of having a car. As soon as you use the car for a personal reason – which includes driving to and from work – Her Majesty’s Revenue and Customs (HMRC) sees it as a taxable asset (or benefit in kind in government speak).

The benefit in kind rate that HMRC attaches to your car is a percentage of its P11D price (the list price including VAT and delivery charges but excluding the first registration fee), based on how much CO2 it emits. The lower the car’s emissions, the lower the rate of BIK; for example, a zero emission car has a rate of 9% and a car with high emissions will attract a rate of 37%.

To calculate your benefit in kind tax, multiply the car’s P11D value by the percentage that applies to its CO2 emissions. Then you’ll need to multiply that figure by the income tax band you are in: either 20% or 40%. This will give you the amount of tax that will be deducted from your wages.

It’s worth noting that the 2017 Finance Bill changed the rules on how much company car drivers pay in tax. Instead of simply being taxed on the benefit in kind value of their chosen vehicle, they will be taxed on whichever is higher – the benefit in kind value or the salary sacrifice amount. This change applies to all vehicles except ultra-low emissions ones, which are governed by the previous rules until 2021.

Fuel – to pay or not to pay?

Your employer might offer to pay for all your fuel, but this is another area where you have to do your sums before you accept, because it counts as another benefit, which means you'll have to pay tax on it.

If you don’t do that many miles, it may be cheaper for you to pay for your own fuel. The next question is do you choose a diesel, petrol, hybrid or electric vehicle as your company car.

Make sure you study our True MPG figures as part of your research – these give the best indication as to what a car will achieve in the real world, as opposed to laboratory test conditions. Meanwhile, our What Fuel? tool will tell you which type of car should cost you least based on the type of driving you do.


Next: Company car tax bands >>

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