Are you aware that there are tax-free benefits available if you choose to have an electric car? Find out everything you need to know by reading below.

What do I need to know?

The government is rewarding drivers with a lower tax charge if they opt for a low emission or electrical vehicle as they are better for the environment.

Company car drivers

The fuel benefit charge does not class electricity as ‘fuel’. So, if you have an electric company car, your employer can pay for all of the electricity used including for private journeys, without getting a fuel benefit charge.

This means that you will save a lot more on your tax bill compared to if your employer paid for the private fuel for a petrol or diesel car.

Example

Jack has an electric company car with a list price of £20,000. His employer covers the costs of all the electricity that is used in the car, including his private use journeys, without triggering a fuel benefit charge. So, Jack will be able to enjoy his private use journeys tax-free.

In comparison, if the employer meets the cost of private motoring in a petrol or diesel company car, the taxable benefit that would arise with a percentage of 22% would be £5,302 (£24,000@22%) for 2019/20.

The tax bill for a basic rate taxpayer would be £1,060 or £2,120 for a higher rate taxpayer.

Electric cars

There is now an advisory fuel rate for electricity, which allows employers to reimburse employees meeting the cost of electricity for business journeys at a rate of 4p per mile.

The employee will not get charged tax but will be excess of 4p per mile.

Employees using their own cars

There are no separate rates for electric cars under the approved mileage payments scheme.

So, if you use your own electric car for business purposes, your employer can pay up to 45p per mile for the first 10,000 business miles in the year and 25p per mile for other business miles tax-free.

If payments are made in excess of the approved amounts, then they will be taxed.

Employees that have their own electric car can benefit from tax-free electricity for private motoring.

But, they must charge their car at a charging points that are provided by their employer or near their place of work.

Further Actions

If your business issues company cars, then it may be worth considering supplying electric cars as there are more tax benefits available to your employee and to you as an employer.

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