New Rules for Electric Company Cars

The reduction in the company car benefit to 0% for cars registered post 6 April 2020, together with the 100% first year allowance for companies on the acquisition of an electric car, makes these vehicles very attractive options when considering the tax efficient remuneration of your employees going forward. However, the rules are not straight forward and there are key points to bear in mind:

The 100% first year allowance only applies to the purchase of new (not second hand) electric vehicles, or those with CO² emissions of less than 50 g/km.

• The 0% benefit in kind rate for electric cars registered post 6 April 2020 only applies in certain circumstances. The vehicle purchased must be either fully electric, or with CO² emissions of 50g/km or less. It must also be able to travel 130 miles or more on the electric charge.
• Where the vehicle travels less than this distance on the electric charge, the benefit in kind rates could still be reduced below the current 16% rate (2019/20), although the reduction would not be as low as 0%.
• Electric cars registered pre 6 April 2020 can still benefit from a lower benefit in kind rate where they meet the same qualifying conditions, i.e. CO² emissions of 50g/km or less and 130 miles or more travelable on the electric charge, although this rate will be 2%, not 0%, for 2020/21.
• The 0% rate will only apply for a single tax year (2020/21). The next tax year the rate increases to 1% (2021/22), then to 2% (2022/23).
• Where cars registered pre 6 April 2020 qualify for the 2% rate, this will remain in place throughout the 3 tax years (2020/21, 2021/22, 2022/23).

For further information on Electric Company Cars, please contact Gemma Hedges on 023 8046 1259.