Company cars have become less attractive to businesses over recent years, partially due to increased taxes. However, from 2020 it may be more cost effective for businesses to offer a company car, if they are electric.
Company cars are taxed on a benefit in kind (BIK) value, which is based on the list price of the car, and the CO2 emission percentage.
Fully electric cars have zero CO2 emissions and from 2020 the BIK percentage will be reduced from 16% to 0% rising to just 1% in 2020/21 and 2% in 2022/23. Low emission cars (<50g/km) will also have lower BIK % based on their electric range.
The taxable benefits could be advantageous both to your business and your employees. In addition to which, your business may be eligible for a grant of up to £3,500 for cars with CO2 emissions of 50g/km or less, and zero emission cars costing less than £40,000 are exempt from road tax.
If you would like to discuss this new company car dynamic, please contact our Corporate Tax team on 01788 539000.