Company car buyers could save thousands of pounds a year on their next car if they go electric, following changes to UK tax rates.
Many drivers have been put off switching to an EV by their relatively high list prices but changes to how benefit in kind tax is calculated, along with a little-known purchasing option could put EVs on a level with traditional petrol and diesel cars.
By using a salary sacrifice scheme to obtain a company car motorists could save an average of £320 a month through tax and National Insurance savings along with the lower running costs of an EV.
The sudden savings have come about because of changes to the benefit in kind (BIK) tax calculations, made to help encourage the uptake of zero-emissions vehicles. Since the start of April, BIK on EVs has dropped from 16 per cent to zero, bringing immediate savings for buyers.
By combining those savings with buying through a pre-tax salary sacrifice programme it is estimated drivers could save between £7,000 and £11,000 over three years.
How it works
Salary sacrifice works by employees giving up a portion of their gross earnings to pay for their company car. By reducing their pre-tax income this helps reduce the amount of tax and National Insurance they pay and the latest BIK rates mean they pay no additional tax on the amount sacrificed.
According to salary sacrifice provider Tusker, this equates to average savings of £320 per month, with £100 saved on tax and NI and a further £220 saved through the zero per cent BIK rate.
Many salary sacrifice schemes also don’t require the same large deposit as retail sales and include extras such as insurance, servicing and breakdown cover, presenting even more potential savings.
Tusker estimates that a driver buying a Skoda Citigoe iV could enjoy tax efficiencies of £116 per month while someone opting for an Audi e-tron could save as much as £369 per month.
Paul Gilshan, CEO of Tusker, said: “For too long, a lot of people have felt priced out of the EV revolution.
“Salary sacrifice is nothing new but appears to be still an unknown to a lot of working people; it’s the solution to drive a new electric vehicle for both 20 per cent and 40 per cent taxpayers, but it seems the myth is that people think they can’t drive an EV unless they are on high salaries.
“Put simply, salary sacrifice is key to making battery electric vehicles affordable for the average British motorist and key to the UK significantly reducing emissions of transport.”
Fiona Howarth, CEO of Octopus Electric Vehicles, which also offers salary sacrifice packages, says the latest changes mean EV costs are now on a par with petrol and diesel cars. She commented: “EVs aren’t just good for our planet, they’re unparalleled in their cheap running costs. Our scheme removes the initial barrier of a top-quality new car’s cost to ensure they’re accessible and extra-affordable.
“If you’re a business owner or employee, you can benefit from the new tax break to support a cleaner transport system – as well as a potential £7,000 saving. Not to forget that these cars are just incredible.”
Poppy Welch, head of Go Ultra Low, the joint government and industry campaign to promote EVs, said the latest BIK change was a significant moment for the market. She said: “This incentive...will lower the monthly company car payments for electric cars significantly, and give employees the financial freedom to choose from a wide range of vehicles. These changes will complement the existing benefits of driving electric, including lower running costs, a quieter, smoother drive and the flexibility of charging from home.”