Changes to the rules on company cars mean there is good news on the way for owners, directors and executives that want to drive a sustainable company vehicle. From April 2020, new legislation comes into play that will make electric cars a highly attractive option for anyone looking to upgrade their wheels to a more ecologically sound vehicle.
Daniel Morgan, Managing Partner at Haines Watts Esher, outlines key changes to the company car rules and why electric cars are now a viable and attractive option.
Making it easier to jump on the EV bandwagon
As an advisor to a huge range of different owner-managed businesses, it’s been clear to me for some time that the use of company cars is on the way out. The increasing ‘benefits in kind’ (BiK) tax costs of running a petrol or diesel-powered car, the environmental impact of these internal combustion engine (ICE) cars and the overall financial impact of buying an ICE car have made the company car a serious no-no for most owners/directors. But, this is all about to change…
From April 2020 the changes brought about by HM Revenue & Customs’ Review of WLTP and vehicle taxes mean that the BiK tables for company cars will disappear, and tax on electric vehicles (EVs) will also disappear. This suddenly makes EVs a viable and highly attractive company car option.
The three main pieces of good news for car drivers are:
- For cars first registered from 6 April 2020, most company car tax rates will be reduced by 2ppt in 2020-21 before returning to planned rates over the following two years – increasing by 1ppt in 2021-22 and 1ppt in 2022-23.
- To accelerate the shift to zero-emission cars, all zero-emission models will pay no company car tax in 2020-21, 1% in 2021-22 before returning to the planned 2% rate in 2022-23.
- On Vehicle Excise Duty, a call for evidence will be published later this year seeking views on moving towards a more dynamic system which recognises smaller differences in carbon dioxide (CO2) emissions.
A performance car – with none of the drawbacks
In my experience, most owner-managers don’t currently have company cars. On the whole, this is because they don’t want a little diesel car (which would be the only economical option) – they want something exciting! With EVs now a more viable alternative, it’s possible to get the high-performance car you want, but within the EV market.
Removing company car tax for zero-emission cars is a gamechanger. EVs suddenly become a great option for anyone looking to buy a performance vehicle, while also removing the harmful emissions of driving an ICE car, making your commute more environmentally sound.
If you want a performance car, it’s a no-brainer to opt for one of the increasing range of sports and performance EVs. Under the new rules, you could buy a Tesla Model S for £90k with no BiK and no tax cost to you. A similarly priced petrol-engined Mercedes S class would incur tax and costs that would make purchasing one as a company car totally impractical, but by going the EV route, you get the same performance with none of the tax drawbacks.
Driving down your carbon footprint
Of course, the lower tax costs are not the only reason for choosing an EV. In 2020, with climate change high on the agenda, there’s a pressing need for all of us to become more environmentally friendly – and choosing a more sustainable vehicle is key to this.
The Government is doing the right thing and promoting the use of EVs to help lower carbon emissions and meet the UK’s sustainability targets. And by making use of these new incentives, you can do your bit to lower your own carbon footprint.
For your company car to qualify, it must:
- Have 1-50g tailpipe emissions – so your car will really need to be a fully electric vehicle, rather than one of the many hybrid petrol/electric vehicles to meet this requirement currently, together with the electric range requirement.
- Have a driving range of 130 miles+ – so your EV can drive for more than 130 miles on a single charge, making it a more useful alternative to a traditional ICE vehicle.
If you can meet these criteria, you’re on the way to getting your performance EV on the road and making the most of this attractive tax break.
Leasing, buying or financing your EV
Choosing the best way to finance your new performance EV can seem like a complex task to begin with. Knowing whether you’re better off buying the car outright or leasing it through the business is a big decision, and something where professional advice is a definite bonus.
The large price of many high-end performance and sports EVs may mean that leasing a car is a more cost-effective way to get the car of your dreams. And there are an increasing number of EV companies and manufacturers providing tailored packages that make it easier to make the switch from ICE to EV.
At Haines Watts Esher, we can help you understand the EV opportunity and make the most of buying or leasing a desirable EV through your company.
Our advisors can help you:
- Choose the right type of vehicle – we’ll make sure you’re looking at fully electric vehicles that meet the criteria for emissions and range, and that you’re not opting for one of the many hybrid petrol/electric models that don’t qualify for the zero tax option.
- Decide whether to buy or lease – once you’ve narrowed down your choice of EV, we’ll help you calculate whether the best route is to lease the car, go for a Personal Contract Purchase (PCP) – similar to a hire purchase arrangement – or buy the car outright through your business. Any EV you purchase will be bought through the company and becomes an asset that will depreciate over time. When the company leases the EV, it may be possible to claim 50% of the VAT on the lease, so that’s worth factoring in.
- Understand depreciation and resale value – the resale of EVs is currently something of an unknown quantity. Technology is moving exceptionally quickly, with new EV models appearing very rapidly and a bewildering choice of different charging options to consider. There’s also very little data at present on how long an EV will last, so it can be a challenge to know when the car may become obsolete or how fast it will lose value.
Now’s the time to switch to an EV
Choosing a new high-end EV as your company car is a great opportunity, but one where professional advice will help you get more value from your new vehicle. By taking the EV route, you can end up driving a highly sustainable performance car, that meets your goals as an owner and is also more economical to finance and run than a similarly specced ICE car.
The Green Car Guide is a good starting point for narrowing down your choice of car, and for EV newbies there’s an excellent new ‘Beginner’s guide to driving an electric car’ video series from Maddie Moate and the team at Fully Charged, who are big advocates for the EV lifestyle.
Talk to us about your EV options and the opportunity for purchasing a high-spec sustainable electric car.
Want to know more? Call us on 020 8549 5137 or email firstname.lastname@example.org