Dramatic Cost Savings for EVs in the UK
Did you know that from April 2020 the UK government made a dramatic change to the tax on EVs that makes them extremely attractive for employees, employers and the self-employed or those in partnerships?
With a wide selection of great EV cars and good infrastructure that is improving daily, now is a wonderful time to have a better car and help the environment.
Table of Contents
Employees and Employers
The employer offers an EV lease scheme to employees, which due to the tax benefits is at a much lower price than the employee could do directly. Typically, this is done via a specialist company, so there is no administration for the employer.
The basic principal is salary sacrifice. The employer allows the employee to reduce their salary by a set amount and the employer uses that to lease a car. This saves both income tax and NI for the employee and NI for the employer.
Salary sacrifice has been around for several years. What is new is the benefit in kind (BIK) for EVs funded this way. From April 2020 this has dropped from 16% to 0% of the value of the car. It does go up to 1% in 2021/2 and 2% in 2022/23, but this is still a massive saving.
Business Owners and Partnerships
If you own your own business, even if you are the only employee, or are part of a partnership business you can write off 100% of the purchase value of an EV against tax. For example, a £40,000 EV would attract £7,600 tax relief in the first year (source EDF).
Low Running Costs Too
EVs have lower running costs than Internal combustion Engine (ICE) vehicles:
- Electricity is much cheaper than diesel or petrol. Particularly when most of the charging is at home, which attracts the lowest cost per KW. You can get a government subsidy for a home charger and many electric companies offer special EV tariffs and subsidised charger installation
- Servicing costs are lower as there is less to service, indeed some EV manufacturers have no regular servicing requirement. Some of this is obvious, like no engine oil to change. But there are less obvious savings, such much less brake wear due to regenerative breaking used by EVs
More Infrastructure and Better Technology
One of the biggest concerns with EVs is “range anxiety”. This is quickly going away as the charging infrastructure is building out, particularly rapid chargers, and EV battery and motor technology development has resulted in much greater range per charge and speed of charging.
For example, there are increasing numbers of EVs with ranges of more than three hundred miles and charge speeds of up to one thousand miles per hour. Meaning you could drive for a couple of hours and while you take a coffee stop you can get enough range added to complete even a long journey.
Also remember that for most people an EV is charged at home, overnight. It’s different to a traditional car – you are unlikely to be visiting a public charger as often as you visit a petrol station. It’s like starting every day with a full tank!
Examples
To bring this to life here are a couple of examples for a no deposit two-year lease.
Higher Rate Taxpayer, leasing a Tesla Model 3 Standard Range Plus. Normally £530 per month, with salary sacrifice its £307
Standard Rate Taxpayer, leasing a Renault Zoe. Normally £270, with salary sacrifice its £184.
Source: This is Money.
Need help setting up?
If you are an employer Somerford Business Advisory can help you setup a scheme and infrastructure that will help you, your employees, and your environmental credentials. This works for organisations of any size in both the private and public sectors.
Great article!
It looks like leased cars will become, again, popular in the years to come.
This would go down well with the Armed Forces! Also look at school academy groups especially in cities Harris (50 schools) where Abi is and ARC academies etc. A great retention tool for them!