The Ultimate Guide to Electric Car Benefit in Kind - We Power Your Car
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The Ultimate Guide to Electric Car Benefit in Kind

There are many benefits of switching your company car fleet to electric. Everything you need to know about the tax advantages of using EV company cars is in this guide, we’ve done the research, so you don’t have to!

How do low BiK rate Electric Vehicles Benefit Companies?

 

A low BiK taxation rate shows that, in addition to being low or zero-emission, the vehicle also has a good all-electric range, meaning that company-funded refuelling charges can be reduced by as much as £1000 per year for 10,000 miles (HMRC classes electricity as a fuel).

They can offer an electric company car to new and existing employees as part of an enhanced package with the reassurance that until at least by 2025, it is a tax-saving measure that benefits the employee.

Employers pay Class 1A National Insurance Contributions (NIC) on BiK for company cars and fuel at 13.8%. As with company car tax, the NIC is directly linked to the P11D value and the CO2 emission figure of a vehicle. This reduces the amount of National Insurance they have to pay in line with the reduction on BiK. 13.8% of a 20% BiK is significantly lower for 13.8% of 1% BiK rate.

And finally, Benefits in Kind taxation will no longer apply to electric company vans which makes offering one as part of an enhanced salary package very beneficial for the employee.

 

How Do Low BIK rate Electric Vehicles Benefit Employees?

 

Very simply, employees pay less tax and National Insurance for a considerable benefit in kind. The BiK tax rate for a fossil fuel car is 20%. When going fully electric, this is reduced down to 1% for 2021 and 2% from 2022 to 2025. They also have private use of a vehicle that has all the benefits of an electric car, including lower costs-per-mile than a petrol or diesel vehicle. BiK on a fossil fuel car is calculated at 20% as standard.

How is BIK calculated for EV’s?

 

Tax is payable on a company car if it is available for private use by an employee, company director or their family or household. It’s worth bearing in mind that in nearly all cases, private use includes journeys between home and work. The tax charge is lower for Electric Vehicles and Plug-in Hybrid Electric Vehicles.

 

 BiK classifications  BiK does not apply if  BiK tax rates are calculated based upon
  • Traditional company
  • Car arrangement
  • Cash for car
  • Salary sacrifice
  • Structured Employee Car Ownership (ECO) scheme
  • The vehicle is provided only for business
  • There is no availability for private use
  • The vehicle is not actually used privately
  • The list price of the car and any accessories
  • The vehicle’s carbon dioxide emissions
  • The type of fuel the car uses
  • The date of registration of the car

 

If an employer provides a taxable benefit, such as the use of a company car, the taxable benefit has to be valued. For most types of benefit-in-kind, the law sets out how to work out the value.

The formula, for calculating your company car BiK rate, is P11D value x BiK rate % = BiK value, then you multiply the BiK value by your income tax band (20-45%).

P11D is a form submitted to HMRC to indicate the value of a company vehicle for tax purposes. It is calculated based on the list price of the vehicle, VAT, optional extras and delivery fees.

For the lowest company car BiK rates of 1%, an electric vehicle must not emit C02 at levels of more than 50 g/km. Those with an all-electric travel range above 130 miles qualify for the highest discounts and those with a range below 30 miles qualify for the lowest.

 

Here is an example of a fully electric car (BEV) for the tax year 2021 to 2022 at 1% and then from 2022 to 2025 at 2% (rates have already been set):

 

For an assumed P11D Value of £33,000

With no emissions and a range above 130 miles, the BiK tax rate will be 1% in 2021 to 2022 and 2% from 2022 to 2025

The BiK Value from 2021 to 2022 will be  £33,000 x 1%   = £330

The BiK Value from 2022 to 2025 will be  £33,000 x 2%   = £660

The BiK value with no incentive would be £33,000 x 20% = £6600

To get the amount your company car will cost you in tax per year, you simply multiply the BiK value by your income tax banding (20-45%):

2021 – 22

£330 x 20% = £66.00 per year / £5.50 per month

£330 x 40% = £132.00 per year / £11.00 per month

£330 x 45% = £148.50 per year / £12.38 per month

2022-25

£660.00 x 20% = £112.00 per year / £11.00 per month

£660.00 x 40% = £164.00 per year / £22.00 per month

£660.00 x 45% = £297.00 per year / £24.75 per month

 

So to put this into a table and compare against a company vehicle costing the same amount but with no BiK incentive and therefore a BiK rate of 20%.

 

Cost of vehicle £33,000 – BiK Incentives for Tax Years 2022 to 2025 at 2%

 

 Incentivised BiK Rate at 2%  Standard BiK rate   at 20%
 Tax Rate  Yearly Amount  Monthly Amount  Yearly Amount  Monthly Amount  Monthly Saving
 20%  £112.00  £11.00  £1320.00  £110.00  £99.00
 40%  £164.00  £22.00  £2640.00  £220.00  £198.00
 45%  £297.00  £24.75  £2970.00  £247.50  £222.75

 

The table below shows the BiK taxation bands for electric vehicles purchased before 06/04/20 and then after 06/04/20 and up to the end of the 2025 tax year. The different rate of BiK on electric cars UK makes the transition from NEDC to WLTP assessment fair to all drivers. In the tax year 2023, BiK rates will revert to a single scale and stay at consistent levels until 2025.

 

BIK Taxation Rates Applicable to Fully Electric Vehicles (BEV)

Electric Range WLTP Assessed BiK % 2021-2022 First Reg Before 06/04/2020 BiK % 2022-2025 First Reg Before 06/04/2020 BiK % 2021-2022 First Reg After 06/04/2020 BiK % 2022-2025 First Reg After 06/04/2020
More than 130 miles 1% 2% 1% 2%

 

Three Electric Vehicles (BEV) with Excellent BiK Rates

 

An electric vehicle has no carbon emissions and will always meet the emissions criteria. The vehicle must also have an all-electric range above 130 miles to qualify for the lowest BIK tax rates of 1% in 2021 and 2% from 2022 to 2025.

We’ve picked out three top candidates for the ideal company car. They score on performance, comfort, space and driving range best for business use.

 

1: Tesla Model 3 Long Range AWD 4dr Auto
This is a car that no company driver would reject. It has seating for five, accelerates to 60mph in 4.4 seconds and has a boundary-pushing 348-mile range.

CO2: 0g/km

 

 

2: Kia e-Niro 150kW 4 64kWh 5dr Auto
An SUV / Estate body shape that goes down well with company drivers. A very respectable range that should cover most business travelling needs CO2: 0g/km
BIK tax band 21/22: 1%
EV Range: 282 miles

 

3: Vauxhall Corsa-e 100kW Elite Nav 50kWh 5dr Auto
The latest offering from Vauxhall, who are now part of the Peugeot/Citroen Group. A comfortable and responsive drive, plus a decent range for covering company mileage

CO2: 0g/km

 

In regard to obtaining the best BiK tax incentives available, these vehicles make a case to be considered when searching for the best company car for BIK in the electric company car market.

 

How is BIK calculated for Plug-in-Hybrid Electric Vehicles?

 

Whilst the BiK tax discounts are primarily designed to incentivise pure electric vehicles, for many commercial and private buyers a Plug-in Hybrid is still a popular option.

Moving from NEDC to WLTP Testing and the effect on BiK for PHEVs

This represents a significant change in the way emission and consumption figures are reported and as a result is very important, particularly to BiK taxation bands for Plug-In Hybrid vehicles. It also throws a complication into assessing BiK for company electric vehicles until rates are aligned in the 2023 tax year.

Currently, the best achievable 2021 BiK tax for a PHEV is the 7% band. The vehicle must have an electric-powered range of between 40 and 69 miles and produce under 50g/km CO2 emissions.

The table below shows the percentage BiK Rate for PHEVs according to their WLTP assessed electric range, bearing in mind that the normal BiK taxation rate is 20% for fossil fuel-powered company cars.

 

BIK Taxation Rates Applicable to Plug-in-Hybrid Electric Vehicles
Electric Range WLTP Assessed BiK % 2021-2022 First Reg Before 06/04/2020 BiK % 2022-2025 First Reg Before 06/04/2020 BiK % 2021-2022 First Reg After 06/04/2020 BiK % 2022-2025 First Reg After 06/04/2020
70 – 129 Miles 2% 2% 1% 2%
40 – 69 Miles 8% 8% 7% 8%
30 – 39 Miles 12% 12% 11% 12%
Less than 30 miles 14% 14% 13% 14%

 

Whilst the BiK tax discounts primarily incentivise pure electric vehicles, for many commercial and private buyers, the Plug-in Hybrid is still a popular option. Here are 4 reasons why this might be the case:

  • Range anxiety is very easy to understand. If a pure electric vehicle runs out of battery power, it stops. Contrarily, if a PHEV is running out of battery power you can simply switch to fossil fuel power.
  • Under-developed charging infrastructure. Again, the fear here is that you run out of battery power and there is no available charging point nearby. A substantial and evenly distributed charging network needs to exist before the confidence is there to move to fully electric-powered travelling. It has been estimated the UK needs to have 25 million charging points for electric vehicles. As of 1st July 2020, there were 18,265 public electric vehicle charging devices available in the UK. Of these, 3,206 were rapid devices.
  • Battery to weight ratio, particularly for cargo vehicles is an issue. Until battery technology improves further, a battery pack that produces a top-level electric driving range can be a rather large, heavy and cumbersome thing.
  • Charging times. As a simplified ratio, the larger the battery pack, the more range it produces and the longer it takes to fully recharge. Home charging systems that produce faster charge times and allow drivers to utilise cheaper electricity tariffs are available and provide some mitigation. There is also some grant aid administered by the Office for Zero-Emission Vehicles (OZEV) available to partially fund dedicated home charging stations.

Three Plug-in-Hybrid Vehicles (PHEV) with best BiK tax incentives for company drivers

 

Fitting a large and heavy battery pack as well as an engine into a vehicle is no mean feat. So, it is not surprising that with the exception of the Swedish Polestar 1 (which is a high performance and sporty PHEV that may not be suited to the company car market) these examples are at the top of the current electric power range when looking for the best company car for benefit in kind tax rates.

 

1: Mercedes-Benz B250e plug-in hybrid
A small yet spacious Mercedes that meets all the criteria for making a great company car. Powered by a 156bhp 1.3-litre four-cylinder petrol engine and an electric motor producing 101bhp CO2: 27g/km
BIK tax band 21/22: 7%
WLTP Assessed Range: 42 miles

 

2: AUDI A3 Sportback TFSI e 40 TFSI e Sport 204PS S Tronic
Rated as a small family car, this PHEV from Audi is always going to be a favourite as a company car. Performance, space and comfort make it an ideal candidate CO2: 27g/km
BIK tax band 21/22: 7%
WLTP Assessed Range: 41 miles

 

3: Peugeot 3008 1.6 Hybrid 225 Allure 5dr e-EAT83:
An SUV with the needed space and comfort for business use. Combines a 1.6 litre petrol engine with a 13.2kWh lithium-ion battery CO2: 30g/km
BIK tax band 21/22: 7%
WLTP Assessed Range: 40 miles

 

As battery technology improves and the kWh x Battery Size x Battery Weight ratio improves, the potential range of a Hybrid vehicle will also go up. With manufacturer investment in research and development, rapid improvements are definitely in the pipeline.

How is BIK calculated for Vans

 

Alongside efforts to encourage commercial and private uptake of electric-powered cars, in the 2020 budget the Chancellor announced that BiK tax rate for a zero-emission van will fall to 0%. This measure is designed to accelerate the uptake of zero-emission vehicles in the commercial and fleet cargo sectors.

This means that if an employee has use of a company van that they are also allowed to use privately, they can do so without triggering the same taxes that apply to company cars. This represents a significant move to support EV adoption for commercial vehicles.

Undoubtedly, with the type of range that the latest editions of fully electric vans are capable of, most companies should take advantage of the 0% BiK rate for fully electric vehicles.

Even so, a PHEV model with shorter range zero-emissions driving, plus the ability to still cover long-distance motorway travel might be more practical for some businesses.

What is a Van?

At first, this should seem obvious, but there is an official HMRC classification for vans that is worth clarifying when considering the best company car for benefit in kind and it is as follows:

“A vehicle primarily constructed for the conveyance of goods or burden with a gross vehicle weight when fully laden not exceeding 3,500kg.” This covers panel vans with two or three-abreast seating, chassis cabs fitted out with conversions, two-seat commercial SUVs and pick-up trucks.

The best way to double-check if a vehicle is classified as a van is to consult the V5C registration document. If the V5 says N1 or N2, then it’s a van. If the V5 states M1 or M2, then it is considered a car.

 

Three Electric Company Vans with Zero BiK Rates

 

1: Citroen e-Relay electric van
Large electric van with a big payload. Available in 3.5-tonne and 4.0-tonne payload. The electric travel range is best in class CO2: 0
BIK tax band 21/22: 0%
WLTP Assessed Range: 211 miles

 

2: Renault Kangoo ZE 33
The Kangoo has been the best selling all electric van in Europe for years. It provides a loading area of up to 4.6 m³ and a payload of 640kg. CO2: 0
BIK tax band 21/22: 0%
WLTP Assessed Range: 143 miles

 

3: Nissan e-NV200 electric van
A practical electric van with a decent electric range. The 4.2 cubic metres load area is among the biggest in the small van sector. CO2: 0
BIK tax band 21/22: 0%
WLTP Assessed Range: 124 miles

 

 

Why EV’s are likely to be the best business choice for company car’s moving forward

 

In a recent budget, the Chancellor laid out a detailed roadmap for companies and drivers on how the Benefits-in-Kind (BiK) taxation system will incentivise EV adoption for businesses and provide tax incentives for electric vehicles up to 2025 and beyond.

Prior to this, the level of BiK taxation at standard rates often presented employees with such a heavy tax burden that offering a company car was not a worthwhile incentive. In many cases, it was cheaper for employees to use their own vehicle.

With the lower BiK taxation rates for company electric vehicles in place until at least 2025, employers once again have a chance to reinstate the company car as a valuable perk to attract the best candidates for positions in the company.

Increasing the incentive value of an electric company vehicle combined with lower road tax, congestion charges and running costs per mile are all great reasons why companies should start to participate in the plug-in revolution.

Larger businesses are now required to measure and report energy use and greenhouse gas emissions, smaller businesses are encouraged to do this voluntarily. This will eventually be followed by compulsory targets. Fossil fuelled vehicles are going to be phased out and with the current tax incentives and grant aid on offer, now is a great time to get ahead of the game.

 

So, if you want to make the switch to an electric fleet, contact us today and discover how we can help your business’ charging needs here.

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This type of electric charger has it's own cable to charge your car.

Socketed charger

This type of electric charger requires a seperate cable to charge your car.

Underground cable

We lay SWA cable laid at 600mm deep, with a protective cable warning tape laid 150mm above the cable. These are laid on a sand or sifted sand soil bed then backfilled.

Overhead cable

We position overhead cables at a minimum height of 3.5m and are run along a catenary wire. The cable run should not be accessible to vehicles.

Standard Installation
Our instant price is fixed if it falls within our standard installation package plus any additions that you have selected (extra cabling for example). This package covers the majority of homes in the UK. Before we undertake your installation we will carry out a digital survey to check that nothing has been missed. After reviewing the survey results some additional work may be required in order to complete your installation safely and to the required standards. If this is the case, we will contact you well before the installation date and advise the cost of any required work. You can then continue with your installation, or alternatively we will refund you in full if you do not want to proceed.

Included in our standard installation is :
• Fitting of a single phase charge point to a brick or plaster wall or other suitable permanent structure
• Up to 10 metres of cable, run and neatly clipped to the wall between the electricity supply meter / distribution board and the charge point.
• Routing of the cable through a drilled hole in a wall up to 500mm (20 inches) thick if this is needed.
• The fitting and testing of electrical connections and protections required for the charge point.
• An additional three way consumer unit, if required
• Installation of a Type A RCBO in an RCBO enclosure
• Up to 3 metres of plastic trunking to conceal interior wiring.
• An O-pen earth protection device if the charge point requires it. (This is NOT an earth rod)
• Up to 4 hours of labour from your installer to complete the work.
• Electrical testing of the whole installation.
• Handover and setup of the charge point and any app that may be needed.

Not included in our standard installation (additional work) :
• Where the installation requires additional cabling over and above the amount you have told us about.
• Upgrade/replacement of the main incoming supply fuse where the local DNO (eg Northern Powergrid) would need to attend site.
• If the charge point is to be mounted on a post/pedestal rather than an existing wall and where you have not selected a post as an extra cost option in your order.
• Installation of a charge point to a three phase supply.
• Where gas and water mains bonding (earthing) is not in place at your property. If this is not in place, additional work would be required before installation of the charge point.
• Any groundwork that has not been selected during the order process.

What else you need to know :
• On the day of installation, please ensure that the area around your consumer unit (fuse box), incoming electricity supply meter and proposed charge point location (including where the cable is expected to be run) is clear and free of obstructions.
• We will need your WiFi password as part of the installation process in order to connect your charge point to the internet. Please have this available for the installer. Details will not be kept.
• The charge point must be on your own designated off road parking.
• The charger will be fixed in line with current guidelines at a height where it cannot be hit by a vehicle.
• Our installers are not able to enter loft spaces; lift floorboards or flooring; take apart any furniture of work above a height of 2m. If you anticipate that any of this may be required, then please contact us and we can discuss in more detail and provide you with a quotation.
• Should there be extreme weather conditions our installers may not be able to continue with you installation if it is not safe to do so (for example flooding). They will always do their best to complete the work where they can.

If you have any questions then please contact our customer service team who will be happy to help. Please also read our terms and conditions.