Despite the increase in company car tax rates in recent years, there are now many incentives for business owners to run low emission vehicles (including hybrids and vans) through their companies and take advantage of the reduced benefit in kind rates on offer.
Electric vs Fuel
Company car tax rates have historically been based on the vehicle’s CO2 emissions. Whilst this holds true for petrol, diesel and fully electric cars, the government have changed how the benefit in kind rates apply to low emission cars. New rate bands have been introduced which depend on the electric range of the car.
For 2023/24, fully electric cars attract a benefit in kind rate of 2% which means very little company car tax is payable.
The benefit in kind rate for hybrids with CO2 emissions between 1-50g/km varies depending on the electric range (see table below).
The rate for cars with emissions over 50g/km is based on emissions only. A surcharge of 4% applies to diesel cars which do not meet the RDE2 standard.
Whilst in previous tax years, the rates differ for cars registered pre and post 6 April 2020, this is now not the case and there is now only one rate for this tax year.
| Company car tax bands 2023/24 | |||
| CO2 emissions (g/km) | Electric range (miles) | % of list price (BIK rate) | |
| 0 | n/a | 2 | |
| 1-50 | 130+ | 2 | |
| 1-50 | 70-129 | 5 | |
| 1-50 | 40-69 | 8 | |
| 1-50 | 30-39 | 12 | |
| 1-50 | <30 | 14 | |
| 51-54 | 15 | ||
| For every 5 | +1 | ||
| 160+ | 37 | ||
| 165+ | 37 | ||
| 170+ | 37* | ||
*Maximum benefit in kind rate is capped at 37%.
Charging costs
The charging of a fully electric car does not constitute ‘fuel’ when considering a possible benefit for private fuel. Similarly, there is no benefit in kind charge where a fully electric car is charged at the employee’s workplace at the employer’s expense.
It is also possible for the company to pay for a vehicle charging point to be installed at the employee’s home and a charge card to allow the employee to use commercial charging points without a taxable benefit arising.
For hybrids, the normal fuel benefit rules apply as well as the application of Advisory Fuel Rates for reimbursement to an employee of business related mileage.
Capital Allowances
Enhanced Capital Allowances are available for a company purchasing new fully electric vehicles, enabling 100% of the cost to be written off against profits in the first year.
Salary Sacrifice
The provision of low emission vehicles does not fall within the new rules on optional remuneration packages. It is therefore possible to provide an employee with a fully electric car under a salary sacrifice arrangement, further enhancing the tax savings available for both employee and employer.
Government grants
To further the attractiveness of low emission vehicles, a government grant is available when purchasing a new van. Providing the CO2 emissions are below 50g/km and the vehicle has an electric range of at least 60 miles, the
government will grant up to £2,500 towards the purchase.
If would like to install a new electric vehicle charging point at home or work, you might be eligible for a grant of up to £350.
Electric Vans
The benefit value of a zero emission company van (with significant private use) will attract a benefit in kind rate of 0% which means no company van tax is payable. Vans also qualify for 100% Enhanced Capital Allowances.
If you provide electric company cars and require assistance or tax advice, please contact one of our team on +44(0)330 024 3200 and they will be happy to assist you.