Did you know that more than half of all vehicles on UK roads are registered to businesses? There are many tax obligations that come with owning company vehicles, and investing in an electric car may offer you some tax-saving benefits.
What is benefit in Kind (BIK)?
Before we dive into the details of BIK and electric cars, it’s important that you understand what Benefit in Kind is. BIK is a tax on a non-salary benefit. This includes vehicles that are provided by the employer to the employee.
BIK rates are usually split between employer and employee, and depending on how many taxable benefits are offered, these perks can rack up quite a hefty bill especially when it comes to vehicles. Luckily, there are many incentive offers for employers who want to invest in sustainable benefits.
What is the benefit in kind rate for electric cars?
The UK government is very keen on getting business owners and fleet managers interested in the idea of investing in electric cars as opposed to traditional petrol and diesel vehicles. So for the tax year of 2020/2021 there was a 0% benefit in kind rate for all electric vehicles. The rate for the 2021/2022 tax year is just 1% for electric cars, and it is set to be 2% for 2022/2023. This means that you are able to budget your benefit in kind tax, and the sooner you invest in one, the sooner you can start enjoying the incredibly low BIK tax rates.
The above mentioned rates apply to electric cars with electric mileages of over 130 miles and with registered CO2 emissions of under 50mg.
Will I be saving money if I buy an electric car instead of fuel-powered car?
Many business owners are hesitant to buy an electric car. Firstly, because they may not know much about electric vehicles, tradition and habit around fuel-powered cars is commonplace, and the second reason is the expense.
Let’s first look at the BIK benefits. An electric car, depending on the type and CO2 emissions, will have you paying anywhere between 1% and 10% in the 2021/2022 tax year. In comparison, fuel-powered cars will cost your company anywhere between 20% and 27% each year and this amount will also depend on the model and CO2 emissions. Let’s look at a little example. When comparing the new electric e-Golf to the Golf GT Petrol 1.5, the e-golf would pay a BIK amount of just £55.20 for the 2021/2022 tax year where the Golf GT Petrol would have to pay a BIK amount of £1,392 for the same tax year.
Secondly, when you buy an electric vehicle, depending on the model, you may be eligible for the Plug-in Car Grant offered by the government, which could save you as much as 35% off of the listed price!
Thirdly, electric cars are much cheaper to run than fuel-powered cars. In the long run you will definitely save hundreds of pounds as you won’t constantly have to fill up with fuel. With charging stations becoming more readily available all over the UK, your savings will only multiple when purchasing an electric vehicle.