Only if there’s no list price can the notional price be used. The price of those in categories (b) and (c) are added if they remain available with the car at any time in the tax year in question. Where 2 cars are provided consecutively the benefit chargeable for each car will depend on the length of time each car was unavailable to the employee. The advisory fuel rate for fully electric vehicles has been confirmed by HMRC as 4 pence per mile. Those April changes to benefit in kind taxation were really significant. At the moment, the benefit-in-kind, or BiK rate, on a pure electric car is 16 per cent and the way that the maths works means much of the tax benefit of the salary sacrifice is eaten up by the charge. Thanks (0) Replying to Paul Crowley: ... benefit in kind for "electric fuel". From 6 April 2020, the benefit in kind rates for all-electric cars is reducing from 16% to 0%, which will potentially result in significant tax and National Insurance contribution (NIC) savings. A later accessory is one which was not available with the car at the time when it’s first made available to the employee, but is available in the tax year in question. Tax changes from 2020/21. For electric vehicle owners, it means they will not pay tax next year with 2021/22’s rate set at 1% and 2022/23’s rate at 2% – the previously-announced rate for 2021/22. Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities. However, a set of items should not be divided for this purpose – for example, a set of 4 alloy wheels with a total cost of £300 is not treated as 4 separate wheels each with an individual cost of £75. However, there are tax breaks for drivers of company cars with shorter electric ranges, but they aren’t as generous. Cars registered in the UK and in other European Community countries must be submitted by their manufacturers or importers for a ‘type approval’ test. You can find the appropriate percentages in the ready reckoner at Appendix 2. This compares to 37% at the opposite end of the emissions scale. We are full-service accountants offering tax and accounting support from bookkeeping to business plans, and payroll to tax-efficient investment advice. B) Taxes that are applicable to business users only 4. Growing your business: Putting your tax relief benefits to work. Note: It’s important to consider your company’s specific circumstances to decide whether a company car or car allowance is the best option for your business and employees. This results in a BIK tax of £5,820 for a basic rate taxpayer per annum or nearly £1,000 per month for a high rate taxpayer. Switching to electric company cars can bring many benefits, including less BIK tax for your employees. Use the CO2 emissions ready reckoners to work out the percentage benefit for petrol-powered and hybrid-powered company cars. There’s a ready reckoner in Appendix 2 which gives the appropriate percentages for a petrol-powered car for 2017 to 2018 onwards. (i) Cars manufactured to run on road fuel gas: an adjustment at Step 1 (paragraph 12.6). A classic car: When all the above conditions are met, substitute the market value of the classic car for the year less any capital contribution for the amount otherwise carried forward from Step 3 above. A car is treated as being ‘unavailable’ on any day if the day falls: (a) Before the first day on which the car is available to the employee. You should make sure that you refer to the source of information that’s most appropriate for the age of the car in question. No benefit in kind charges for having an electric company car Usually, a benefit in kind charge is applied on company cars and becomes a non-starter (forgive the pun). While every effort has been made to reflect the above information in a correct and up to date manner, we cannot exclude the possibility that any of this information is not or no longer, especially as some of this information is subject to change by third parties. For the 2019-20 tax year, hybrid and electric car benefit-in-kind rates were hiked up significantly. The Vehicle Certificate Agency used to produce a booklet called New Car Fuel Consumption and Emission Figures, if you’ve kept a copy of this booklet there’s no need to check the database on the internet as well once you’ve found the CO2 figure for the right model of car and year. See previous editions for earlier years. Emissions - the amount of gas the car … Condition (a) means that those accessories which are necessarily provided for use in the performance of duties of the employee’s employment are not counted. The list price is the price as outlined above on the day before the car was first registered (when the car was new). We use cookies to collect information about how you use GOV.UK. If during that period the employee is provided with a replacement car, it’s not also charged as a benefit if it’s not: Payments that an employee makes for the private use of the car are deducted from the figure carried forward from Step 6 and can reduce the benefit charge to nil. Introduced in 2002, company-car tax applies to cars bought by employers for their employees' private use. Familiar company car tax terms. These enhancements are: The price of initial extra accessories is only added to a car with a list price (the notional price of the car at paragraph 12.5 includes them). Therefore, if the car is transferred from one employee to another, the first employee’s contributions are not taken into account in calculating the benefit of that car for the second employee. All content is available under the Open Government Licence v3.0, except where otherwise stated, Step 5: Calculating the car benefit charge for a full year, Step 6: Reductions for periods when car unavailable, optional remuneration arrangements in Appendix 12, Company car benefit – the appropriate percentage (480: Appendix 2), Cars and vans available for private use – when a benefit charge is incurred (480: Chapter 11), Taxable fuel provided for company cars and vans (480: Chapter 13), Expenses and benefits for directors and employees - a tax guide: 480, Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, Zero-emission cars (including electric cars), Diesel cars (all Euro standards up to 2017 to 2018), Diesel cars that meet Euro standard 6d from 2018 to 2019 onwards, All other Diesel cars from 2018 to 2019 onwards, value of the benefit worked out under the normal rules (ignoring any capital contribution or private use payment), amount of any salary or cash pay foregone. From 6 April 2020 until 5 April 2021, full battery electric vehicles (BEVs) will pay no Benefit in Kind rate. From 6th April 2020, Benefit in Kind (BIK) savings on efficient plug-in hybrid electric vehicles and battery electric vehicles will increase dramatically, in measures are designed to increase the uptake of fully electric cars among fleets. Make any required deduction for payments by the employee for private use of the car (paragraph 12.36). In 2020/21 the electric van will be taxed at 80% of the benefit for a normal van, and in 2021/22 at 90% (s115 (1C), Income Tax (Earnings and Pensions) Act 2003). (c) If there’s no list price of either kind, the notional price (the inclusive price it might reasonably have been expected to fetch at the time immediately before the accessory is first made available with the car). Switching to an electric car can bring significant tax benefits for businesses and this is set to get even better from April 2020. By making this positive change, HMRC are increasing accessibility to electric vehicles (EVs) and enabling the industry to grow. The Treasury says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points. Market values of classic cars may be found in specialist publications, contemporaneous sale documents or insurance details for the car concerned. Benefit in Kind (BiK) rates for cars registered after April 2020. They’re treated as separate cars with the relevant reductions applied to each car. Find the appropriate percentage for the car (paragraph 12.22). The treatment applies to both new and used cars. This is how you could potentially drive a free electric company car this 2020 tax year, all paid for by the HMRC. To help us improve GOV.UK, we’d like to know more about your visit today. Examples include company cars and healthcare benefits. Introduced in 2002, company-car tax applies to cars bought by employers for their employees' private use. For 2018 to 2019 only, if the diesel car meets Euro standard 6d use P11D code A. The price of the original accessory continues to be counted (even though it may have been removed in an earlier tax year) and the price of the replacement is ignored. The full price of the car determined in Steps 1 to 3 is used to calculate the car benefit so the figure carried forward at Step 3 is the figure multiplied by the appropriate percentage at Step 5. The Benefit in Kind tax for hybrid vehicles will depend on the cars zero-emission mileage There isn’t any taxable benefit for the employee if they charge their electric car at work The employee can reclaim the electricity at 4p per mile for company cars when charging at home or at a public charging point only. A car allowance can be more affordable for your company and allows a greater degree of flexibility and choice. He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm. From 6 April 2020, there will be a few changes to P11D forms for Ultra Low Emission Vehicles (ULEVs) such as pure electric and some hybrid cars. It is planned to change to 1% in 2021/22 & 2% in 2022/23. For example, a diesel engine company car with CO2 emissions of 120g/km would have a company car tax percentage of 33 per cent from April 2020. The Government has created two new BIK tables for drivers of company cars. No account of any other car should be made when calculating the benefit for each car provided. This method of calculation is modified in the case of classic cars (those 15 years of age or more; Steps 1 to 3, see paragraph 12.18). Here’s everything UK businesses and the million or so company car users need to know about HMRC company car tax. You may have made an electric car available to your employee for private use during 2018. Benefit in Kind for electric vehicles for tax year 2020/21 is 0%. The appropriate percentage for type E cars is 0% for 2010 to 2015 inclusive. If the normal car is not available for a period of less than 30 days, there is no reduction because the car is not deemed to be ‘unavailable’ during that period. This is the same as the lowest benefit-in-kind tax on a car with a petrol engine that emits up to 50 grams of CO2 per kilometre. Draft legislation for this exemption was published in July 2018, which can be found together with a policy paper and explanatory note here So, does it pay to go electric? According to data from HMRC in 2017, the number of employees paying company car tax reached a five-year high. The approved CO2 emissions figure is shown on the Vehicle Registration Document (V5) or Vehicle Registration Certificate (V5C). The appropriate percentage for these cars can be found in the ready reckoner at Appendix 2. A change being driven by the rapid rise in electric and hybrid vehicles. Cost of converting a car to run on ‘road fuel gas’ (type (ii) in paragraph 12.3). Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors. Changes to the UK’s company car tax system will mean drivers choosing a pure electric car pay no benefit-in-kind charges from next year. If private use only, the cost of electricity used is taxable as a benefit-in-kind If business use only or mixed use, the total cost of electricity used is taxable as a benefit-in-kind. An initial extra accessory is a non-standard accessory which is available with the car at the time when it’s first made available to the employee. The BIK rate for an all-electric car is currently expected to then rise to 2% by 2022/23. For hybrid cars with a CO2 of 1-50g/km registered: before 6 April 2020 New European Driving Cycle, use the ‘electric range’ within section 49.2 on the certificate of conformity. Benefit in Kind for electric vehicles for tax year 2020/21 is 0%. From 6 April 2020 a new emissions test will be used to identify the appropriate percentage. Planning ahead Employers looking to provide tax-efficient company cars in the future should consider electric cars and hybrid models with a good electric range. Updates on finding the appropriate percentage for emissions for 2020, under 12.27 Section 139, Check how the new Brexit rules affect you. Published 30 December 2019 Last updated 6 April 2020 — see all updates For some stupid reason HMRC seemed only interested in company cars The logic would still apply to all the truck drivers that paid with fuel card. From 2011 to 2012 there’s no restriction on the price of a car. This growth is likely to continue as more people try to move away from fossil fuels, which is being incentivised by the Government. The level of CO2 emitted by the car is one of the factors reviewed in the course of the test. Changes are being made to significantly reduce the benefit in kind charges on these vehicles. It makes the arguments for a company car alternative look shaky at the very best. Because of the tax benefits of electric and hybrid cars this means Tom and the company can potentially save tax and National Insurance of £10,103 overall. From April 2018, if your diesel car is certified to meet Euro standard 6d do not apply the adjustment for the diesel supplement. ... there would be no benefit in kind charge on electricity that employers provide to charge employees’ personally owned electric vehicles. For electric vehicle owners, it means they will not pay tax next year with 2021/22’s rate set at 1% and 2022/23’s rate at … The Benefit in Kind tax on electric company cars has dropped to 0%. In this article, we’re going to be discussing HM Treasury’s decision to heavily incentivise the uptake of Batt… This is subject to an adjustment for diesel cars (see paragraph 12.29). (c) Attached to the car (whether permanently or not). For employers looking into electric company cars, there are now considerable savings to be made. For cars first registered before 6 April 2020 you should continue to use the New European Driving Cycle emissions figure to find the appropriate percentage. Electric vehicles that are recharged at work will attract 20% VAT on the electricity used. And then rising to 1% the following year and then 2% through to April 2025. The market value of a classic car is the price which it might reasonably have been expected to fetch in a sale on the open market on the last day in the tax year when it was available to the employee, on the assumption that any qualifying accessories available with the car on that day are included in the sale. The benefit in kind value on a £20,000 electric car in 2020/21 will only be £400, costing a higher rate taxpayer £160 in tax – considerably less than the £880 payable in 2018/19. Find the price of the car (paragraph 12.4). There is an exception to this rule though. The benefit in kind value on a £20,000 electric car in 2020/21 will only be £400, costing a higher rate taxpayer £160 in tax – considerably less than the £880 payable in 2018/19. The intention is for this exemption to be included in the next Finance Bill which will be … The appropriate percentage for the very few cars with an internal combustion engine and one or more reciprocating pistons but without an approved CO2 emissions figure is based on their engine size, as follows. The price is in either category (b) or (c) and 127(2) of paragraph 12.11, as appropriate, and is calculated on the same basis. Cars with less than 30 miles' electric range will pay 14% benefit-in-kind, with a sliding scale down to 2% if your car will drive more than 130 miles on silent e-power. The normal price is the list price. If an employer provides electricity to an employee to charge their own car, a benefit in kind arises representing the cost of the electricity used for private mileage, which must be reported to HMRC The provision by an employer of a chargepoint for an employee at their … Car benefit is calculated in a series of numbered steps (more details start at the paragraphs given). Related: Benefit In Kind: When does a van become a company car? This incurs a tax charge of £959 for a basic rate taxpayer per annum or £1,918 if you are a high rate taxpayer, On the other hand, a Range Rover, which has considerable CO2 emissions, has a percentage charge of 37% on a P11D value of £78k. (d) A mobile phone. It is planned to change to 1% in 2021/22 & 2% in 2022/23. The BIK rate for an all-electric car is currently expected to then rise to 2% by 2022/23. 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