April 2021 Changes to Electric Company Car Tax
With the approach of April comes the beginning of a new tax year, and the end of a lucky break for those with electric vehicle company cars, who have enjoyed 0% taxable benefit since April 2020.
All is not lost, though. In fact, actually very little is changing. First of all, let’s get back to the basics of company cars and benefit in kind.
Company cars and Benefit in Kind
When a company car, it’s a great perk. However, because it is an asset that also provides personal benefit, it’s also taxable.
Benefit in Kind is the tax that employees must pay on their company perks, such as a company car. The amount that you’ll need to pay is dependent on various factors, which include its overall value. For the purposes of this article, we’ll be focusing on the upcoming changes, specifically for EV company cars, but for more information on Benefit in Kind generally, take a look at our guide here.
Electric vehicle company car benefits
So, what makes electric vehicles different? Well, because they are a much more environmentally friendly way to travel - due to not being powered by traditional engines which use gas and release harmful emissions - the government has been incentivising their use. One of the factors for the calculation of Benefit in Kind in recent years has been emissions. Vehicles producing lower levels of Co2 are taxed less as a result.
Last year, it was decided that the Benefit in Kind tax payable for a purely electric vehicle would be reduced to 0% of its P11D value, making them an even more desirable option. This was always intended to be temporary, and it’s coming to an end in April 2021.
Electric company car benefit changes in 2021
Now, don’t panic, because this isn’t bad news at all. While it’s true that electric company cars will be taxable again, it’s only by the slightest margin. In fact, the rate is only increasing to 1%, until 2022, where it will then rise to 2%, guaranteeing a continuation of minimal monthly payments for these drivers over the next few years.
Realistically, a 0% tax rate, whilst enjoyable, was never going to be a sustainable figure in the long run. The intended increase is slight, and was always outlined in the plan, so it won’t come as a harsh shock to any budgets. And, considering that vehicles with a large production of Co2 are looking to pay up to 37% in tax, it’s still a fantastic deal, and a huge incentive to continue to drive more and more companies to consider electric vehicles over cars with a traditional gas engine.
Though the figure is admittedly rising, company directors and their employees considering electric vehicles should not be put off. Reducing emissions is one of the highest priorities of the UK government, and will continue to be so for the foreseeable future as they strive to meet agreed climate commitments and goals. While tax changes are vital for economic health, it remains in everyone’s best interest for this figure to rise slowly and steadily. Tax benefits concerning EVs aren’t going anywhere.
Here at Rivervale, we’ve got a variety of leasing deals on all kinds of car models to suit your business or personal needs. If you’re interested in leasing a company car, find out a little bit more about doing so, here.
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