The biggest missed opportunity of our time…

*Only 2.7% of UK new vehicle acquirers in 2018 took advantage of the significant tax and cost savings available from switching to electric vehicles…

What the taxman giveth, he will surely take away…

Car owners in the UK are failing to take advantage of the significant tax savings available from switching to electric vehicles. In particular, small and large businesses that rely or have adopted company car schemes and salary sacrifice schemes as a cost saving and employee morale booster, have been extremely slow to catch on to the benefits.

We fault their professional tax and accounting advisers, many of whom have failed to study and communicate these benefits effectively on their clients’ behalf. If after reading the rest of the article you want to learn more, please get in touch with us and we will point you in the right direction.

Before we list the individual benefits, here’s what we found when we carried out a comparison of a company car scheme (using Go Ultra Low’s great car tax calculator tool) where an employee is provided with a Volkswagen Golf (petrol) vs a similar electric version Volkswagen e-Golf…the following tax differences were significant!

Now that we have your attention, let’s look at the benefits car users are leaving on the table in more detail to better explain the above findings.

Let’s start with individual car owners, e.g. your typical family car:

• Plug-In Car and Plug-In Van Grants: There’s up to £3,500 and £8,000 in grants from the government,available for each purchase of new 100% electric cars and vans, respectively.
• Zero road tax: Given road tax is based on vehicle emission levels, pure electric vehicles see £0 payable in the first year, and then £0/year standard rate payable in all subsequent years for cars costing up to £40,000.
• Significantly lower fuel and maintenance costs: UK electric car journeys cost 3–4p per mile on average, versus 12p per mile on petrol. Furthermore, fewer electric vehicle car parts means annual maintenance savings of an average yearly amount of circa £300 per vehicle.

What about the benefits for businesses:

• 100% First Year Allowance: Zero emission cars qualify for a 100% First Year Allowance (FYA) on the purchase cost.
• Lower National Insurance Contributions (NICs) for company cars: For employee company cars that are pure electric, businesses end up paying lower Class 1A NICs as a result of their lower Benefit In Kind (BIK) rates for zero emission pure electric vehicles vs petrol/diesel vehicles.

And with staff retention and employee morale a critical part of running any business, employee benefits that businesses are missing out on include:

• Pure electric vehicles are eligible for Salary Sacrifice: Pure electric vehicles are eligible for salary sacrifice (likely to be popular with staff looking to drive an electric vehicle), ensuring a lower National Insurance bill for both the employer and employee.
• Reduced Benefit In Kind (BIK) tax: Zero emission vehicles offer the lowest BIK rates - 16% for 2018/2019 & 2% from 2020/2021 versus 21% for a diesel car emitting 124 g/km in CO2 (2018 UK average car emission).
• No Fuel Benefit Charge: Employees are exempt from paying benefit-in-kind on car charging electricity at work. This has proven to be a huge favourite for employees who drive their electric vehicle to work…free fuel!

Lastly, the open access to the increasing number of clean air zones in towns/cities across the UK will only become a more significant consideration to businesses that operate cars/vans in urban centres.

There are also many more regional incentives and emission penalties across the UK that owning a pure electric vehicle would help avoid. Some of these include:

• Congestion Charge & Ultra Low Emission Zone (ULEZ) exempt in London: Pure electric vehicles are exempt from the £11.50/day London Congestion charge & the £12.50/day Ultra Low Emission Zone charge (which is set to include plug in vehicles that are hybrids and cover a wider area from 2021!).
• Interest Free Loans up to £35,000 for personal purchase of electric vehicles in Scotland: Transport Scotland funds an interest-free Electric Vehicle Loan of up to £35,000 for purchases of a new plug-in electric vehicle for personal use.
• Interest Free Loans up to £120,000 for business purchase of electric vehicles in Scotland: Transport Scotland funds an interest-free Electric Vehicle Loan of up to £120,000 for purchases of a new plug-in electric vehicle for business use.

So if you are an individual or business looking to purchase or lease your next vehicle, please contact us and we can help you navigate the benefits and process of switching to electric cars.

*According to the Society of Motor Manufacturers and Traders (SMMT), over 2018 electric cars represented 2.7 per cent of the total new car market in the UK.

Disclaimer: The information provided on this article is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from a professional accountant before you take any action or refrain from action.

Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties.

The information can only provide an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.