A Guide to Electric Car Tax for Company Vehicles in the UK

Women Checking Electric Car Tax

When you think of the word “fleet”, what do you picture?

For most, it might be a line of sleek, matching vehicles bearing a company logo, all ready for the day’s work. Whether your business delivers goods, offers services or just needs to get from A to B, company cars are a cornerstone of many organisations.

Now, imagine this fleet transformed. Instead of the typical petrol or diesel engines, there is the gentle hum of electric motors. Where there used to be exhaust fumes, now there is only clean air.

This image is becoming more and more of a reality as we advance into a future increasingly defined by sustainability.

Businesses across the globe are embracing electric vehicles (EVs), driven by environmental concerns, cost-saving opportunities and forward-thinking government policies.

In the UK, specifically, we are seeing a shift towards greener transport, and businesses are leading the way. For companies, EVs present a host of advantages.

Yet, any decision to change an integral part of business operations requires careful consideration, especially when it comes to tax implications. Navigating the landscape of company car tax in relation to electric vehicles can be complex.

Yet, understanding these nuances is critical to making an informed decision. With the right knowledge, companies can make the most of EVs opportunities while avoiding potential pitfalls.

Key Points to Consider Regarding the Electric Company Car Tax

Benefit-in-Kind (BiK) Tax Rate

At the heart of company car tax calculations in the UK lies the Benefit-in-Kind (BiK) rate. Defined as the tax implication of the perks or benefits an employee receives “in kind” from their employer that are not included in their salary, the BiK rate is central to understanding company car tax.

For electric vehicles, the BiK rates have seen a significant drop, making EVs a financially sound choice. In fact, the financial year 2020/2021 witnessed a 0% BiK rate for zero-emission vehicles.

This rate is set to incrementally increase in the future, albeit remaining significantly lower than combustion engine cars. With that in mind, the reduced BiK tax rate is a key factor in the affordability of EVs for company use.

Charging Infrastructure

When considering electric vehicles for a company fleet, the charging infrastructure is a key element that needs to be addressed. This aspect has a significant impact on the operation, maintenance, and use of the fleet.

Companies must ensure that they have sufficient and reliable charging facilities for their fleet, both at the company premises and on the road.

This is where solutions like the Bonnet app come into play. With access to over 200,000 chargers across Europe and more than 17,500 in the UK alone, this EV charging application ensures that drivers can easily find a convenient charging station, irrespective of their location.

This is a critical factor for businesses, especially for those whose operations span large areas. The assurance of readily available charging points can remove the range anxiety associated with electric vehicles and boost drivers’ confidence.

The Impact of Electric Range

One of the primary concerns when considering the shift to electric vehicles is the range that these cars offer. Traditionally, electric vehicles were believed to have a shorter range compared to their fossil fuel counterparts.

Still, advancements in technology have significantly improved the range of electric vehicles, with many models now offering ranges that are comparable to, or even surpass, those of petrol or diesel cars.

That being said, the range of the vehicle still remains an important consideration. This is especially true for businesses whose operations involve long-distance travel or long hours on the road.

Ensuring that the chosen vehicle has a sufficient range to meet operational needs without needing to stop for frequent charges can impact the efficiency and productivity of the business.

Here again, the Bonnet app serves as a reliable ally by offering real-time data about the car’s battery life and range, helping drivers plan their routes and stops efficiently. This data can significantly reduce the range anxiety that may otherwise deter businesses from opting for electric vehicles.

Environmental Considerations

The environmental impact of a business’s operations is becoming an increasingly important consideration. Companies across the world are feeling pressure to diminish their carbon footprint and contribute to a more sustainable future.

The transport industry, in particular, is one area where significant improvements can be made, as it is one of the major contributors to carbon emissions.

Switching to electric vehicles offers businesses the opportunity to significantly reduce their carbon emissions. Electric vehicles produce zero tailpipe emissions, thereby helping to improve air quality, particularly in urban areas where air pollution is a significant issue.

Moreover, the total lifetime emissions of an electric vehicle, even when factoring in the manufacturing process and the generation of the electricity used to charge them, are significantly lower than those of petrol or diesel vehicles.

By using the Bonnet app, companies can further boost their sustainability credentials. By offering a simplified EV charging solution and a vast network of car charging stations, Bonnet facilitates the transition to a green fleet, helping companies contribute to the fight against climate change.

Capital Allowances

Companies purchasing electric cars can also take advantage of a 100% first-year allowance. This means businesses can deduct the full cost of the electric vehicle from their pre-tax profits in the year they bought it.

This allowance is part of the government’s broader strategy to incentivise the transition to zero-emission vehicles, and it presents a significant saving opportunity for businesses.

The Bottom Line

In summary, the move to electric vehicles offers a spectrum of benefits for companies, ranging from substantial tax savings to sustainability credentials. As we move into a future where sustainability is not just desirable but essential, electric vehicles are set to play an increasingly significant role in business fleets.

However, embracing EVs is not just about purchasing new vehicles; it requires a holistic approach. This includes understanding the complexities of company car tax, investing in appropriate charging infrastructure, and considering the total cost of ownership.

By doing so, businesses can ensure that they are not just adopting electric vehicles for the sake of it but truly integrating them into their operations for optimal benefit.

Generally speaking, it is a transformative process, but the journey towards electrification can be less daunting with the right information. On top of that, with supportive platforms like Bonnet, businesses can further streamline the process.

With its vast charging network and transparent pricing, Bonnet can help businesses manage their fleets effectively, making the transition to electric cars smooth and efficient.

And as the saying goes, “Knowledge is power”. This could not be truer in the context of company car tax on electric vehicles. So arm yourself with information, consider the implications and opportunities, and you’ll be well on your way to a greener, more sustainable and tax-efficient fleet.

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