Electric cars are being encouraged by governments worldwide in an attempt to be more environmentally-conscious – and now there’s an added incentive for businesses to use them. Find out more about the new electric car tax reduction and what this means for your organisation.
What Is Company Car Tax?
Also known as Benefit in Kind Tax (BiK), Company Car Tax is a taxation that is applied to the benefit that your employee is receiving in the form of a car for their own personal use. Currently the level of this tax is based on the companies P11D value. This itself is calculated on a list of features comprised of: VAT, the vehicles listed price, delivery fees of the vehicle and any optional extras.
What Is Changing About The BiK Tax Rate?
The BiK tax rate is decided by the HM Treasury. In April 2020 it will see a dramatic transformation, with employers making savings on vehicles that have pure electric batteries or plug-in hybrid electric vehicles. Starting next year, there will be zero BiK tax on vehicles that qualify for the first year. The following year this rate will rise to 1% and then in 2022 the rate will be 2%, which is still huge savings compared to non-environmentally friendly vehicle tax rates. Some C02 emitting vehicles, such as the latest 2.0-litre diesel BMW 3 Series will be subject to huge penalties – 31% tax in this case.
Why Are Electric Cars Receiving This Benefit?
The government is making the changes in the hope that the tax reliefs will make electric vehicles more desirable for employers and employees as their first choice of car model. The new tax measures are being implemented in the hope that there will be a dramatic increase in the uptake of electric cars.
What About Electric Cars Already In Use?
Companies already using electric cars will benefit from the changes too. In 2020 they’ll have a 2% BiK rate, which will stay the same for the two years until the rate on new electric cars has aligned.
Get Help With Your Business Tax
Does your business need support and advice on tax issues including company car tax? Our expert services can help make sure you’re making the most of the financial opportunities available to you. To find out more about our services and how we can help you today, get in touch with the Engage Accountancy team. You can contact us by calling 01214394041, emailing: firstname.lastname@example.org or filling in our contact form, here.