No, it’s not our favourite subject either, but on this occasion it really cannot be avoided.
There have been some MAJOR changes to the company car tax treatment of battery electric vehicles (BEV) this year. If you don’t already know about them, you really should. There is a ton of money at stake.
Company car tax rates are designed to encourage company car drivers to choose cars with lower levels of CO2 and (from April 2018) NOx emissions. Incentives are offered both to the company and the driver to select low emission vehicles.
Under the current system, the amount of tax paid is a function of the emissions and the value of the vehicle. The tax is then taken from payroll according to the tax bracket of the employee (basic rate of 20%, higher rate of 40% or additional rate of 45%).
The headline changes
From April 2020, the benefit in kind (BIK) rate (which forms the basis of the company car tax calculation) for BEVs dropped from 16% to Zero. It will rise to just 1% in 2021 and 2% in 2022.
By way of comparison, the BIK rate on a 1.5L Ford Focus Diesel is 33%. This includes the 4% supplementary charge introduced in 2018 for all diesel vehicles that are not ‘RDE2’ compliant (which is most of them).
So, we can already see that this has the potential to translate into some major savings for BEV drivers.
Real world comparison
OK, enough jargon, let’s do a comparison and, in the time honoured phrase, see how much you could save…
If you are driving a 2018 Ford Focus 1.5L Eco-Blue, the numbers are as follows;
BIK rate = 33%, BIK value = £8,851,
So a 20% rate taxpayer will be paying £1770 in 2020, £1,824 in 2021 and £1,877 in 2022.
A 40% rate taxpayer will be paying £3,540 in 2020, £3,648 in 2021 and £3,755 in 2022.
By contrast, a Renault Zoe Z.E.50 BEV is zero BIK rated in 2020, 1% in 2021 and 2% in 2022. So;
A 20% taxpayer pays: Zero in 2020, £61 in 2021, £123 in 2022
A 40% taxpayer pays: Zero in 2020, £123 in 2021 and £245 in 2022.
So, if you are a 20% rate taxpayer, by switching from a Focus to a Zoe, you will save over £1,750 per year (£5,287 over three years)
If you are a 40% rate payer, the saving is over £3,500 per year (£10,595 over three years).
That’s before we’ve even started to talk about the fuel savings…
So, forgive us for raising the dreaded spectre of tax…but we thought you should know this.
If you would like to know more about which EV might work for you, contact us at CleanCar (firstname.lastname@example.org) and we will be happy to help with one of our tailored EV Switching reports.