Electric cars are being encouraged by governments worldwide in an attempt to be more environmentally-conscious. For this reason, 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 tax on employees who receive benefits or perks on top of their salary. If you have a company car for private use, you will have to pay a BIK contribution or company car tax. Currently, the government base this tax on the companies P11D value and calculated on a list of features comprised of VAT, the vehicles listed price, delivery fees and any optional extras.
What Is Changing About The BiK Tax Rate?
HM Treasury decides on The BiK tax rate. 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. From 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%, in 2022 rising to 2%, which is still a valuable saving 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 a car model. It is of the hope that with the new tax measure, 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: email@example.com or filling in our contact form here.
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