Electric vehicles for your business – a win win for employers and employees?
20th May, 2024
In January 2024, we hit the milestone of one million battery electric vehicles registered in Britain since 2002 (when records began). This solidifies the boom in the electric and hybrid vehicle market is not slowing down anytime soon – particularly with the UK’s plan to ban new petrol and diesel vehicles by 2030.
The UK government have an ambitious green agenda to implement and to achieve this have made a number of tax benefits available, benefitting both the employee and the employer. This, coupled with the environmental benefits has led to many business owners considering changing their fleet to hybrid or electric vehicles. Fully electric vehicles, so those with less than 50g/km CO2 emissions, offer the maximum tax advantages – the lower the emissions, the higher the tax advantage.
In this blog, we summarise the key benefits for the employer and employee.
Benefits for the employer
- The battery of the electric vehicle is included in the price of the vehicle
- The electric car employee owner-driver can claim up to 5p per mile for each passenger they take on the journey
- The normal Benefit in Kind rules are applicable to electric vehicles being provided to employees and the rates of tax depend on the level of C02 emissions. For 2023-2024, this is 2% of the list price.
- Where the employee uses their own car, the mile rate serves as the same for a traditional car (petrol and diesel cars)
Benefits for the employee
Whilst company cars have offered a number of tax advantages to the company, the uptake by employees has traditionally been low due to the personal tax liability created by the Benefit in Kind (BiK) tax. Electric vehicles for business however are now offering a number of tax benefits:
- The 2023-2024 zer0-emission rate is 2%, whereas hybrids are charged up to 14%
- The van benefit charge for 2023-24 is nil, assuming zer0-carbon emissions
- Percentages for low-emission cars such as electric cars that emit less than 75g of c02 per kilometre will increase by 1% throughout 2025/26, 2026/27 as well as 2027/28.
| Vehicle CO2 emissions | BiK rate for cars registered before 6th April 2020 | BiK rate for cars registered after 6th April 2020 | ||
| 2021-2022 | 2022 – 2025 | 2021-2022 | 2022 – 2025 | |
| 0 g/km | 1% | 2% | 1% | 2% |
| 1-50 g/km (electric range >130 miles) | 2% | 2% | 1% | 2% |
| 1-50 g/km (electric range 70-129 miles) | 5% | 5% | 5% | 5% |
| 1-50 g/km (electric range 40-69 miles) | 8% | 8% | 8% | 8% |
| 1-50 g/km (electric range 30-39 miles) | 12% | 12% | 12% | 12% |
| 1-50 g/km (electric range <30 miles) | 14% | 14% | 14% | 14% |
In summary
Electric vehicles offer not only compelling environmental benefits over petrol or diesel vehicles, but they are also an attractive option for employers and employees looking to benefit from the tax advantages – so it definitely is a win-win situation in our view.
Our tax team are always happy to help with any questions about how your business can benefit from tax advantages. You can reach us on 020 7384 4894 or by email.
Hamid has a wealth of experience advising owner-managed businesses across a wide range of issues, including the sale of businesses, value generation for shareholders, and formulating and advising on tax-efficient strategies. He’s also a specialist at helping start-up companies reach their full potential through teamwork, strategic thinking, and leadership.
His expertise spans technology, cryptocurrency, property investment, and various service-based industries, offering clients tailored solutions to navigate their unique challenges effectively.
