Electric car company car tax

There's never been a better time to choose an electric vehicle (EV) as a company car – here, we'll explain why...

With up to 239 miles of range (WLTP) the Nissan LEAF is great for long family journeys, or lots of short ones

If you are about to change your company car, do yourself a favour: consider switching to an electric car. You could save a small fortune in benefit-in-kind (BIK) tax.

It’s no secret that the sale of new petrol and diesel cars will end in 2030, and the Government is trying to encourage everyone into electric vehicles (EVs). And one of the carrots the Government is offering is taxation.

That’s why EVs really stack up as a company car proposition – because the BIK rates are minimal, and will remain so for a few years yet. Ditching a fossil-fuelled car could save you hundreds of pounds every month.

Tesla Model 3 2022 front cornering

BIK rate for fully electric cars

There’s no such thing as a free lunch, and there’s no such thing as a free car – but an EV is the next best thing.

For the start of the 2022-2023 tax period, the Government set the BIK tax rate for EVs at just 2%. This rate will remain until the end of the 2024-2025 tax year. Yes, an employer will still need to allow the employee enough budget to afford the contract hire or leasing rates, but that driver will pay very little BIK during the ownership period.

To put that in context, the Hyundai i10 petrol-powered small car has emissions of at least 114g/km and therefore sits in the 26% tax bracket for 2022-2023. So a much larger and more comfortable electric family car such as a Citroën e-C4 will cost a company car driver a huge amount less in tax than a city runabout.

Citroen e-C4 long term

Reasons to think twice

So, are electric company cars a motoring nirvana? Well, not quite. That’s where the homework comes in.

Supply is an issue for many models at the moment, and then you’ve got the sheer cost of leasing, because an EV tends to be quite a bit more to lease than a similar-sized car that runs on petrol or diesel. You’ll need to smile nicely at the finance manager to see if they’ll allow you a big enough monthly leasing budget to cover the payments for an EV. You can compare rates on our leasing pages.

Then there’s the whole question of range. It’s undeniable that when you have a long journey in the offing, EVs demand much more planning than a petrol, diesel or hybrid. Yes, you can offset some of that by having a charging point installed at home, but if that isn’t an option then an EV might not be for you.

Renault Zoe 2022 charging socket

Don't turn up late to the party

We already know how company cars will be taxed until the end of the 2024-2025 tax year, because the Government typically announces company car tax rates for a few years at a time

After this date, nothing is clear, but the Government is pretty unlikely to allow such beneficial tax rates to carry on for too much longer.

This is because EVs are almost guaranteed to take an ever-greater market share as we move inexorably towards the 2030 ban on new petrol and diesel cars, so you can expect tax bandings to gradually rise as the Government moves to protect revenue that would otherwise be lost. And that’s why the time to act is now, because the current CO2-based taxation system will eventually be replaced and the powers that be will come up with a different way to decide who pays what. You can be sure that you’ll need to pay more.

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