With electric and hybrid cars becoming increasingly more popular, there are different tax implications for both companies and employees using either fully pure electric cars or hybrid cars to bear in mind
In our overview of company hybrid and electric car tax implications, we explain the potential taxable benefits and the capital allowances that can be claimed.
Employment tax implications
Pure electric cars
- The car benefit value is calculated in the same way as company cars (list price multiplied by relevant percentage based on CO2 emissions), with the exception being that lower appropriate percentages for zero-emissions vehicles will apply. The list price used for calculating the value must include the cost of the battery (even if this is leased separately).
- It should be noted that for 2019/20, cars with CO2 emissions of up to 50g/km (including zero emission cars) will have a percentage charge of 16%, but from 2020/21, the percentage charge for cars with emissions up to 50g/km will depend on the maximum distance that the car can be driven in electric mode without recharging the battery.
- Cars which are first registered from 6 April 2020 will be taxed according to the CO2 emissions figure measured under the Worldwide harmonised Light Vehicle Test Procedure (“WLVTP”).
- Optional remuneration arrangements (salary sacrifice agreement) rules will not apply.
- The fuel benefit charge will not apply to any electricity supplied by an employer (regardless of the level of private mileage).
- No income tax liability will arise on vehicle charging facilities at or near an employee’s workplace providing that these are generally available to all employees at that workplace.
- Advisory Fuel Rates cannot be used to reimburse employees for the cost of electricity paid for personally by the employee but used for business travel.
- If the employer reimburses employee for the cost of the electricity, the tax treatment depends on whether the car is used for business use only (reimbursement is exempt) or for personal/mixed use (reimbursement taxable as earnings and deduction then available for cost of business miles travelled).
- If the employer does not reimburse employee for cost of electricity, employee is entitled to a deduction from earnings for the actual electricity cost of business miles travelled
- The normal car and fuel benefit charge rules apply.
- Normal application of Advisory Fuel Rates applies
Capital allowances implications
Capital allowances enable companies to write down the cost of purchasing cars against taxable profit.
100% first year allowances in the year of purchase are available for new cars registered before 31 March 2025 if the car either emits not more than 0g/km of CO2 (75g/km before 1 April 2018 or 50g/km before 1 April 2021) or it is electrically propelled.
In contrast, cars with emissions of 1-50g/km (51-110g/km prior to April 2021) will be written down at 18% per annum, of the cost of a car against the company’s taxable profits each year. Cars with emissions of 51g/km (111g/km prior to April 2021) or above will be written down at 6% per annum.
Please note that 100% first year allowances can no longer be claimed on electric vehicle charge points installed at workplace.