The future of commercial fleets
Back in March at the Budget, the Chancellor had been looking to help secure a future focused on changing our transportation preferences, and his attention was on the need to get more businesses using fully electric vehicles. That will still be good advice, regardless of when you are reading this blog.
The government introduced a grant to promote the sale of ultra-low emission vehicles (ULEV) as far back as 2011. The scheme has been a success and has supported the sale of more than 200,000 ULEVs in the UK – with more than half of them zero-emission vehicles. Around 30 new models of ULEV are scheduled to launch in the UK this year, and zero-emission vehicles represent 3% of the new car market.
While the government grant has reduced in recent years, the budget confirmed grants for zero-emission vehicles will continue until at least 2022/23. This means the purchase of electric vans can be supported by up to £8,000, large vans and trucks by up to £20,000, taxis by £7,500 and motorbikes by £1500.
In the March budget, the appeal of a zero-emission car was also enhanced with the benefit in kind for the tax year 2020/2021 reduced to 0% for vehicles registered either before or after 6 April 2020. (Any benefit given by an employer to their employees attracts income tax, and when it comes to a company car, the rate is based on both the car’s C02 emissions and the list price of the vehicle.)
The long-term benefit of driving a zero-emission car will extend beyond 5 April 2021, with a tax rate of 1% in 2021/22 and 2% in 2022/23. The reduced rates over three years will also reduce the employee’s personal income tax liability, and save on the Class 1A National Insurance liability for the employer. A win all round.
The good news continues: there are also tax advantages if you provide charging facilities at work, (or if you install a vehicle charging point at the employee’s home) and, because electricity isn’t classed as a ‘fuel’, fully electric cars don’t attract fuel scale rate charges either.
If a fully electric car isn’t achievable right now, perhaps as cash flow is tight after the impact of the virus, then there are also reduced rates available for cars with ultra-low emissions, (CO2 emissions below 75g/km). Employees can use a salary sacrifice arrangement to purchase this type of car, and they are taxed on the cash equivalent of the benefit without having to make a comparison with the salary sacrificed.
For vehicles registered after 5 April 2020, with a range of more than 130 electric range miles, the 0% rate applies for the 2020/2021 tax year. Cars registered before that date will be charged at 2% tax for the current tax year.
So, to reduce tax and do your bit for the environment, please give us a call for further guidance on this kind of benefit in kind.