The Government confirmed on 17 November 2022 that reduced benefit in kind rates will continue for electric car owners who purchase their cars through their business or employer. This is great news and could help company car drivers and business owners reduce their emissions, their reliance on fossil fuels and their income tax charges by switching to electric.
The benefit in kind (BIK) rate for electric cars is just 2% compared with up to 37% for petrol and diesel cars, depending on their emissions. These rates apply whether the car is brand new or secondhand.
The BIK rate for electric cars will increase after 2025 by 1% per year for three years – which means that in 2028 electric company car owners will only be charged a benefit in kind rate of 5%. Here are some examples of what the numbers look like in practice for cars registered in 2020:
VW Golf 8 Petrol Hybrid 1.5 has a BIK rate of 30%. This means that every month you pay between £134 and £301 in tax charges (depending on your tax band). If you owned a VW ID.3 instead, which has a range of over 200 miles, these monthly charges would be between £13-£29, rising to £33-£73 in 2028.
BMW 520i 2l petrol SE Auto has a BIK rate of 33%. This means that every month you pay between £211 and £474 in tax charges. If you owned a Tesla Model 3 Long Range All Wheel Drive instead, which has a range of 300 miles, these monthly charges would be between £17-£37, rising to £42-£93 in 2028.
We are not tax experts and whether a company car is tax efficient for you and your business depends on your own circumstances and you should seek advice from your accountants. For independent advice on electric cars and which models fit your lifestyle, talk to EV Experts!