Tax and contracting News
26 - 11 - 2021
The UK government is promoting the use of electric and Ultra Low Emission (ULEV’s) vehicles as part of their drive to zero carbon emissions. One of the measures included in that plan is to reduce the Benefit In Kind (BIK) percentages applicable to electric cars provided by employers to employees.
How is the BIK calculated?
The BIK value is calculated in exactly the same way as for any other vehicle provided by an employer to an employee. Please see our Employees Company Cars Taxation Advice Note for further information. The difference is in the fact that the BIK percentages are currently lower for electric and ULEV vehicles.
What are the applicable BIK Percentages?
|
Vehicle CO2 emmisions |
BIK rate for cars registered before 06 April 2020 |
BIK rate for cars registered after 06 April 2020 |
||
|
2021-2022 |
2022-2023 |
2021-2022 |
2022-2023 |
|
|
0 g/km |
1% |
2% |
1% |
2% |
|
1 -50 g/km Electric Range > 130 miles |
2% |
2% |
1% |
2% |
|
1 -50 g/km Electric Range 70-129 miles |
5% |
5% |
4% |
5% |
|
1 -50 g/km Electric Range 40-69 miles |
8% |
8% |
7% |
8% |
|
1 -50 g/km Electric Range 30--39 miles |
12% |
12% |
11% |
12% |
|
1 -50 g/km Electric Range < 30 miles |
14% |
14% |
13% |
14% |
The Benefit in Kind value is based on the original list price of the vehicle plus any additions. The income tax payable by the employee depends on the top level of tax that they pay.
For example:
|
Vehicle List Price at 06.04.2021 |
£90,000 |
£50,000 |
|
Emissions |
0 g/km |
50 g/km |
|
Electric Range |
>130 miles |
< 30 miles |
|
|
|
|
|
2021-2022 Tax year BIK Value |
£900 |
£7,000 |
|
Employee income tax cost |
|
|
|
Tax at Basic Rate of 20% |
£180 |
£1,400 |
|
Tax at Higher Rate of 40% |
£360 |
£2,800 |
|
|
|
|
|
Employer Class 1A NIC cost |
£124.20 |
£966 |
What are the tax consequences for the employer?
The business can claim capital allowances against their tax liability on the purchase of the vehicle. The level of allowance depends on the type of car, CO2 emissions etc.
The employer will, however, pay Class 1A National Insurance, 2021/2022 at 13.8%, on any BIK incurred by the employee. Obviously these charges will be lower for electric vehicles.
Are there any grants available for electric cars?
As we are encouraged to use electric vehicles more grants are being announced. If considering whether to acquire an electric vehicle we would recommend looking at the grants currently available and those expected to be announced when planning the date to acquire the vehicle.
The main grants currently available are:
1. Plug in Grant
Low emission vehicles may be eligible for a plug-in grant.
The amount of the grant depends upon the category the vehicle falls in and HMRC list the relevant categories and vehicles on www.gov.uk. Not all low emission vehicles will get a grant. Only vehicles approved by the government are eligible for the grant.
|
Category |
CO2 Emission |
Distance without any emissions |
Grant |
|
Cars (Cost incl VAT and delivery < £35,000) |
< 50 g/km |
> 70 miles |
35% of purchase price up to £2,500 |
|
Motorcycles |
0 g/km |
> 31 miles |
20% of purchase price up to £1,500 |
|
Mopeds |
0 g/km |
>19 miles |
20% of purchase price up to £1,500 |
|
Small Vans (<2,500kg gross vehicle weight) |
< 50 g/km |
> 60 miles |
35% of purchase price up to £3,000 |
|
Large Vans (2,500kg – 3,500kg) |
< 50 g/km |
> 60 miles |
35% of purchase price up to £6,000 |
|
Taxis – Purpose built |
< 50 g/km |
>70 miles |
20% of purchase price up to £7,500 |
|
Trucks (3,500kg – 12,000kg gross vehicle weight) |
At least 50% less than the equivalent conventional Euro VI vehicle |
> 60 miles |
20% of purchase price up to £16,000 EVHS |
Electric Vehicle Homecharge Scheme provides grant funding of up to 75% towards the cost of installing electric vehicle charge points at domestic properties across the UK.
There are eligibility for these grants which are continually being updated. We would advise anyone considering whether this is applicable to check the most recent guidance.
2. Workplace charging scheme (WCS)
The workplace charging scheme is a voucher based scheme The scheme is intended to help with the initial costs of purchase and installation of electric vehicle charging points.
More information is available at:
https://www.gov.uk/government/collections/government-grants-for-low-emission-vehicles
The grants noted above cover the whole of the UK. England, Wales, Scotland and Northern Ireland governments may also have individual schemes that apply and certain regional councils may also be offering grants for their specific area.
If you would like to discuss any of the issues noted above or wish to discuss a specific electric vehicles please contactus@foremansllp.com
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Dave Wilde, Foremans (UK) Limited
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