Company cars in the traditional sense have not always been the most tax efficient reward to offer a workforce.

However, as part of its green agenda, the Government want to encourage the use of electric vehicles (EVs) and hybrid models, and so the tax system that applies to these cars reflects this aim.

With obvious tax incentives, it is unsurprising that businesses, company directors and employees are keen to explore the purchase and/or provision of EVs.

In this blog, we offer up a company car tax comparison to show you the difference between electric, plug in hybrid and Diesel vehicles.

Calculating company car tax

When calculating company car tax, the following factors are accounted for in the equation:

• Rate at which you pay income tax
• List price of the car (the value input on a P11D)
• CO2 emissions; and,
• Fuel.

To determine the benefit-in-kind (BiK) value of the vehicle, the list price is multiplied by the company car tax rate (per CO2 emissions). The BiK value is then multiplied by the relevant income tax rate, which equals the amount of company car tax that is payable.

An employer providing the vehicle to an employee will be liable to pay Class 1A Employer National Insurance contributions (NICs) at 13.8% on the benefit-in-kind value.

Electric vs Hybrid vs Diesel

 

*Diesels attract a surcharge of 4% subject to a maximum of 37%.

The comparison above speaks for itself. Plug in hybrids are clearly a better alternative to petrol/diesel vehicles. Though, bear in mind, diesel is typically more expensive than its petrol counterpart. Meanwhile, electric vehicles are both the most environmentally friendly and tax efficient.

Both employee and employer stand to benefit from the favourable tax treatment that EVs and hybrid cars attract.

How can George Hay help?

We understand the extent to which tax is an integral consideration when it comes to company cars and employee benefits.

Whether you are an employee or employer, we can help you to dissect the implications of purchasing EVs.

To talk to us about company car tax, or for more information about the tax and accounting services we offer, contact us on 01462 708810 or visit www.georgehay.co.uk.