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According to the latest vehicle statistics from SMMT, electric vehicle sales had an increase of 19.8% YTD in 2023 compared to 2022, with an increase in market share to 13.1%. But should your next company car be electric? What are the benefits for the employee and the organisation? 

We spoke to business advisory consultants, Moore and Smalley and they have detailed everything you need to know. 

Company Car Taxation

Zero-emission vehicles have a scale charge of just 2% of the retail price. The good news is that this rate is set to be with us until 5 April 2025.

Car Fuel

For non-electric vehicles, there is a separate fuel benefit charge where an employer pays for fuel for non-business journeys.

For an electric vehicle, there is no fuel benefit charge where the employer provides the electricity free of charge. This might be done via a charging point at the employer’s premises for example. However, the reimbursement of home electricity bills is a taxable benefit.

Mileage Allowance

HMRC does not consider electricity to be a fuel, therefore the petrol/diesel advisory fuel rates cannot be used to reimburse employees for business journeys. However, HMRC allows a rate of £0.09p per mile (from March 2023) for fully electric company cars.

What are the other tax-free benefits of having an electric company car?

The provision of installing a vehicle charging point at the employee’s home.

The provision of a charge card with a fee of up to £100 per year allows individuals unlimited access to local authority vehicle charging points. 

Salary Sacrifice

One of the lesser-known benefits of electric vehicles is that employees can enter into a salary sacrifice with their employer for an electric vehicle, and this will be protected from the anti-avoidance rules, known as optional remuneration arrangements. 

This allows the employer to provide an electric car to their employee whilst maintaining a cost-neutral position for the employer, as the employee is effectively paying for the vehicle.  This also allows the employee to benefit from the low company car taxation, and benefit from the income tax and NIC salary sacrifice savings.

Capital Allowances

For new and unused electric vehicles or hybrids with CO2 emissions of 0 g/km or less, there is a special enhanced capital allowance of 100% available. This allows for full tax relief in year one, as compared with a maximum of 18% writing down allowances for cars with CO2 emissions of 50 g/km or less, and 6% writing down allowances for cars with CO2 emissions over 50 g/km.

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