If you live in the United Kingdom then you will have encountered the concept of the “company car”, where an employer offers their employee a car, paid for by the employer so that the employee can use it for work. Of course, the lucky staffer then gets to take the car home and use it for visiting beloved in-laws, trips to IKEA and the rest of their personal life. This “Benefit In Kind” is then taxed by The Government.
Before 2002 the proof that your car really was a company car was that you drove 18,000 miles or more on company business. Cue therefore many London based drivers booking meetings in Aberdeen while their Scottish colleagues would book Brighton based meetings just to clock up those all important business miles. It didn’t take long before people realised that this was not environmentally responsible. So the rules changed, and now the all important figure was the level of carbon emissions.
With the move to an emissions based scheme The Government introduced a category of vehicle which they called Zero Emissions Vehicles. These vehicles attracted a 0% Benefit in Kind allowance, something which Tesla, Nissan and the other EV producers have been trading on as, right now in October 2014 if you drive an electric car given to you by the company then you pay NO TAX on it whatsoever.
Such largesse from Her Majesty’s Revenue and Customs was never going to last and in April 2015 company EV drivers should brace themselves for the shock of paying tax on their cars. From April 2015 your EV will no longer be classed by HMRC as a Zero Emissions Vehicle but will become an Ultra Low Carbon car and you will be able to emit up to 50g/km of carbon dioxide through your non-existent tailpipe.
In the financial year 2015-2016 your Ultra Low Carbon vehicle will attract a Benefit In Kind of 5% and in 2016-2017 this rises to 7%.
Benefit In Kind is calculated not on what your employer paid for your car but is based upon the list price of your car, including any options which you have decided to add on. Yes, Volkswagen e-UP drivers, that means that if you order the £85 noise emitter to save pedestrians from being mown down by you, HMRC will class 5% of that cost (£4.25) as a benefit direct to you and tax you accordingly. When you are looking at a new car this figure will be listed on the quote or on the lease agreement. This is what goes on your P11D form back to The Revenue.
So if we went shopping for a Nissan LEAF TEKNA today, before we start adding those all important options the car will have a list value of £30,490. Using this figure therefore next financial year The Revenue will say that you have received 5% of that (£1524.50) as a taxable benefit. If you are then earning enough to be a basic rate taxpayer then you will be taxed 20% of £1524.50 or £304.90 for the use of the car and you should expect to see this being taken from your wages. If you are a higher rate tax payer then you will be taxed £609.80 for the LEAF. If you’re an upper rate taxpayer then you’re driving a Tesla so you’re figures will be higher still – don’t worry, you can afford it!
From April 2016 these figures rise a little – your LEAF will now cost you £426.86 or £853.72 based upon your tax rate.
Because the rate now includes Zero Emission vehicles up to ones emitting 50g CO2/KM then Nissan LEAF drivers (0) and Chevrolet Volt drivers (27) find themselves along with BMW i3 drivers (13) and BMW i8 drivers (49) in facing a 5% Benefit In Kind. This strikes some electric vehicle drivers as being inconsistent and a policy who’s consequence will be to make pure EVs less attractive than their PHEV or ICE competition. In fact some drivers are considering
Of course we are not accountants and none of this constitutes financial advice so please speak to your fleet manager or your accountant to get accurate figures and what this means to you and your family. You can also visit http://carfueldata.direct.gov.uk/ for your own research.
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