Tax Talk: Company Car Uptake Grows By 10k
The introduction of low tax electric cars has resulted in 960,000 individuals being provided with company cars in 2015/16, up 10,000 (1.05%) on the previous year, according to research from UHY Hacker Young

The popularity of electric cars could be the reason behind this increase in uptake as these vehicles have low tax rates compared to diesel and petrol cars.

Company cars have been in decline since 2001 due to the tax rates being increased on company cars to try and lower the number of vehicles on the road.

Businesses have started to buy large fleets of electric cars to give employees as perks mainly due to the tax breaks available to these low emission vehicles. Tax rates on diesel cars can be as high as 37% of the list price annually.

For example, an electric Nissan Leaf would cost a business less than £120 per month in tax as a company car, while a comparably-priced diesel Nissan Qashqai would cost almost £200 per month.

As announced in Autumn Budget 2017, from April 2018, employer-provided electricity to allow employees to charge their vehicles will be exempt from being taxed as a benefit in kind. This will apply to electricity provided in workplace charging points for electric or hybrid cars owned by employees.

Mike Crellin, director at UHY Hacker Young, said: ‘Last year we saw the first increase in the use of company cars for more than a decade, and that trend is clearly continuing. Lots of businesses have seen the tax advantages there are at the moment in giving their employees the perk of an electric car. It’s a very tax-effective employee benefit indeed, especially compared to petrol and diesel cars.

‘In a worst-case scenario, a company car user can end up paying tax on the entire retail price of a car in less than three years, if it is a luxury diesel. An electric car will cost a fraction of that, thanks to the generous tax breaks.

‘Of course, the more businesses start to use this tax break, the greater the chance the Government will make it less attractive, so the window of opportunity is likely to be quite limited.’

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Amy Austin is reporter, Accountancy Daily, published by Croner-i Ltd, responsible for news and reporting, covering buy-to-let taxes, Brexit, careers and diversity, millennials and internships, and Making Tax Digital, as well as wider tax, audit and accounting issues. Before joining Accountancy, she worked for a number of publishers as an intern and studied journalism at University of Roehampton.