Electric Car Benefit In Kind Rates Explained

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A benefit in kind is any non-cash benefit given to employees that has a monetary value and because they have monetary value, they are treated as taxable income. This includes company cars.

Any employee who receives a company car could face a benefit in kind tax bill. However, this could be removed if your company decides to use electric vehicles. That’s because the Government is offering more incentives to encourage businesses to switch to electric vehicles and reduce emissions and global warming.

So how do the rules work around benefit in kind for electric cars?

Keep reading to find out.

How much is company car tax on electric cars?

There are two parts to company car tax:

  • The benefit in kind paid by the employee
  • The National Insurance contributions paid by the employer.

When an employee uses a company car for private purposes, including commuting to work, they have to pay a benefit in kind tax which is usually collected through PAYE (Pay As You Earn).

As an incentive for businesses to choose greener vehicles, the government has reduced the benefit in kind tax for electric and plug-in hybrid vehicles for the next few years.

Benefit in kind rates start as low as 0% for zero-emission electric cars, and will increase by only 1% each tax year until 2023.

Then they’d only have to pay an extremely low 1% for the next year, and only 2% the year after that. 

These minimal costs are especially attractive compared to non-electric cars, which could be hit with a tax charge of up to 37% because of their high CO2 emissions.

 

How to calculate benefit in kind for an electric car

You can calculate the benefit in kind value for a specific car by multiplying the car’s P11D value by the benefit in kind percentage.

Then multiplying that by your income tax bracket percentage.

The benefit in kind percentage depends on the vehicle’s CO2 emissions.

The P11D value is the list price of the car, plus any extras, delivery fees, and VAT.

The calculation looks like this: (P11D value) x (BIK rate) x (income tax rate).

For example, a Nissan Leaf with a P11D value of £29,790 which emits 0 g/km of CO2 would be in the 1% BIK rate for the upcoming 2021-2022 tax year.

If you’re in the basic income tax bracket of 20%, you’d have to pay £59.58 for that year, while someone in the higher 40% bracket would pay £119.16.

HMRC has an online company car benefit calculator if you don’t want to work it out manually.

The BIK rates for electric cars can be even more confusing because of recent regulation changes.

But if your company car is an ultra-low emissions vehicle (ULEV) they’ll be in your favour.

 

Benefit in kind 2020 changes

A lot of the confusion around this topic comes from the fact that benefit in kind rates are different for cars registered before April 2020 and cars registered after April 2020.

These changes are due to the government switching the CO2 emissions figures from earlier New European Driving Cycle (NEDC) test results to the newer and more accurate Worldwide harmonised Light vehicle Test Procedure (WLTP) test results in April 2020.

Stricter tests mean that the updated emissions rate labels for many vehicles are now as much as 10-20% higher than before, though the vehicles themselves haven’t changed.

So WLTP-tested vehicles aren’t unfairly penalised more than NEDC-tested ones, the government has reduced the benefit in kind rates by 1-2% compared to pre-2020 rates.

Read more about the different benefit in kind brackets below and use the tables to help you calculate your EV company car tax.

 

Is the benefit in kind rate different for hybrid cars?

Pure electric car BIK rates are automatically lower than plug-in hybrid car BIK rates because a hybrid vehicle will obviously have higher CO2 emissions than a zero-emission vehicle.

Not to worry, though, because hybrid car benefit in kind rates are still quite low compared to petrol or diesel cars.

For plug-in hybrid electric vehicles (PHEVs), their BIK brackets depend on both their CO2 emissions and how far you can drive them in electric mode (their electric range).

This is called ‘zero emission mileage’ and should be listed on the car’s Certificate of Conformity.

If your new hybrid vehicle has an electric range of 130 miles or more, it could qualify for the lowest BIK tax rate along with 100% electric vehicles.

Check the tables below for the full range of benefit in kind rates for electric vehicles registered before and after April 2020, with the 2019 rates also listed for savings comparisons.

 

Benefit in kind rates for cars registered before April 2020

All cars registered before 6th April 2020 must pay benefit in kind tax at the rates in the tables below using NEDC emissions data. 

Even if your vehicle was registered before this date, it would still be eligible for 0% until April 2021 if its emission rate is 0 g/km.

CO2 emissions Electric range 2019-2020 BIK rate 2020-2021 BIK rate 2021-2022 BIK rate 2022-2023 BIK rate
0 g/km n/a 16% 0% 1% 2%
1-50 g/km >130 miles 16% 2% 2% 2%
1-50 g/km 70-129 miles 16% 5% 5% 5%
1-50 g/km 40-69 miles 16% 8% 8% 8%
1-50 g/km 30-39 miles 16% 12% 12% 12%
1-50 g/km <30 miles 16% 14% 14% 14%

 

Hybrid vehicles aren’t eligible for the lower rates if their emissions are above 50 g/km and/or their electric range is below 30 miles.

 

CO2 emissions 2019-2020 

BIK rate

2020-2021 

BIK rate

2021-2022 

BIK rate

2022-2023 

BIK rate

51-54 g/km 19% 15% 15% 15%
55-59 g/km 19% 16% 16% 16%
60-64 g/km 19% 17% 17% 17%
65-69 g/km 19% 18% 18% 18%
70-74 g/km 19% 19% 19% 19%
75-79 g/km 22% 20% 20% 20%
80-84 g/km 22% 21% 21% 21%
85-89 g/km 22% 22% 22% 22%
90-94 g/km 22% 23% 23% 23%
95-99 g/km 23% 24% 24% 24%
100-104 g/km 24% 25% 25% 25%
105-109 g/km 25% 26% 26% 26%
110-114 g/km 26% 27% 27% 27%
115-119 g/km 27% 28% 28% 28%
120-124 g/km 28% 29% 29% 29%
125-129 g/km 29% 30% 30% 30%
130-134 g/km 30% 31% 31% 31%
135-139 g/km 31% 32% 32% 32%
140-144 g/km 32% 33% 33% 33%
145-149 g/km 33% 34% 34% 34%
150-154 g/km 34% 35% 35% 35%
155-159 g/km 35% 36% 36% 36%
160-164 g/km 36% 37% 37% 37%
165-169 g/km 37% 37% 37% 37%
>170 g/km 37% 37% 37% 37%

 

With the average car in the UK emitting 127.9 g/km, it’s easy to see how much less you could be paying with an electric or hybrid company car.

The savings are especially evident compared to diesel cars, which have to add 4% on top if they don’t meet the Real Driving Emissions 2 (RDE2) standards.

 

Benefit in kind rates for cars registered after April 2020

For cars registered from 6th April 2020 onwards, new benefit in kind rates apply using the updated WLTP emissions figures.

With these new rates, hybrid vehicles can also benefit from the lowest percentages as long as their electric range is at least 130 miles with 50 g/km emissions or less.   

 

CO2 emissions Electric range 2019-2020 BIK rate 2020-2021 BIK rate 2021-2022 BIK rate 2022-2023 BIK rate
0 g/km n/a 16% 0% 1% 2%
1-50 g/km >130 miles 16% 0% 1% 2%
1-50 g/km 70-129 miles 16% 3% 4% 5%
1-50 g/km 40-69 miles 16% 6% 7% 8%
1-50 g/km 30-39 miles 16% 10% 11% 12%
1-50 g/km <30 miles 16% 12% 13% 14%

 

While rates will remain the same for cars registered before April 2020 with emissions above 50 g/km, newer cars will benefit from initially lower rates that slowly increase over the next 3 years.

 

CO2 emissions 2019-2020 

BIK rate

2020-2021 

BIK rate

2021-2022 

BIK rate

2022-2023 

BIK rate

51-54 g/km 19% 13% 14% 15%
55-59 g/km 19% 14% 15% 16%
60-64 g/km 19% 16% 17% 18%
65-69 g/km 19% 16% 17% 18%
70-74 g/km 19% 17% 18% 19%
75-79 g/km 22% 18% 19% 20%
80-84 g/km 22% 20% 21% 22%
85-89 g/km 22% 20% 21% 22%
90-94 g/km 22% 21% 22% 23%
95-99 g/km 23% 22% 23% 24%
100-104 g/km 24% 23% 24% 25%
105-109 g/km 25% 24% 25% 26%
110-114 g/km 26% 25% 26% 27%
115-119 g/km 27% 26% 27% 28%
120-124 g/km 28% 27% 28% 29%
125-129 g/km 29% 28% 29% 30%
130-134 g/km 30% 29% 30% 31%
135-139 g/km 31% 30% 31% 32%
140-144 g/km 32% 31% 32% 33%
145-149 g/km 33% 32% 33% 34%
150-154 g/km 34% 34% 35% 35%
155-159 g/km 35% 34% 35% 36%
160-164 g/km 36% 35% 36% 37%
165-169 g/km 37% 37% 37% 37%
>170 g/km 37% 37% 37% 37%

 

The rates for cars with emissions up to 50 g/km will be frozen at the 2022-2023 rates for another 2 years, so you would only pay a maximum of 2% for a zero-emissions vehicle until 2025.

 

What about the benefit in kind rate for electric vans?

There aren’t tax benefits for plug-in hybrid vans, but fully electric vans are eligible for lower benefit in kind rates.

The van benefit charge isn’t based on the vehicle’s value or CO2 emissions, it’s just a fixed rate for light commercial vehicles.

Until this year, electric van drivers have had to pay a percentage of the standard van benefit charge.

In the 2020-2021 tax year, the standard rate is £3,490 and electric vans get a 20% discount with a rate of £2,792.

This rate was actually supposed to increase in 2021, but after seeing the positive response to the benefit in kind reductions for electric cars, the government is expanding these reductions to electric vans.

So, if you drive an electric van, you’ll benefit from the 0% rate from April 2021 to April 2022, while colleagues driving zero emission cars will go up from 0% to the 1% rate.

 

Which electric vehicle has the best benefit in kind rate?

The lower the emissions rate, the lower the benefit in kind rate, so fully electric cars will save more than hybrid cars and hybrids will save more than petrol or diesel cars.

If you’re looking for a new company car, you should pay attention to the WLTP emissions rates before you make a final decision.

Obviously, this tax isn’t the only factor in choosing a company car, but there’s a whole range of other savings from going electric that make it an excellent business choice.

For example, the OZEV plug-in grant offers a 35% discount up to £3,000 when buying an electric car and 20% up to £8,000 when buying an electric van. 

In addition, the Workplace Charging Scheme is another government grant available to businesses who want to install chargers for employees using electric vehicles.

The government will fund up to £350 per socket for up to 40 electric vehicle charging sockets when you get them installed by an OZEV-approved fitter like Downtown Electrical. 

Contact us for help with electric car charging points for business, so you can save even more money while keeping your fleet powered up.

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