The Government has recently announced that it is pledging to investment £620 million into grants for electric vehicles and street charging points. The announcement is set out in the Government’s Net Zero Strategy: Build Back Greener report which outlines how the over-arching target of net Zero emissions for the UK, can be reached by 2050. Additionally, mandatory reporting requirements for large businesses look set to be introduced around their impact on the environment.
We have produced a range of updates and a detailed guidance brochure on EVs and how they could benefit your workforce. Read more here.
Impact for employers
We await to see how the £620m funding will be structured and whether employers will be incentivised further to provide employees with electric vehicles (EVs). What is clear though, is that the way in which the company car taxing regime was restructured in April 2020 reflects the Government’s ongoing commitment to encourage employers to provide EV cars.
It is rare indeed, that we can look back and say that the taxable value of a current day benefit in kind (BIK) is cheaper compared to say, 34 years ago. However, the company car BIK (the value on which an employee pays tax) stood at £525 for a small car in 1987/88. In contrast, the current BIK for a typical EV, such as a Tesla model 3, results in a BIK of £420 - based on a list price of £42,000 and the multiplier percentage of 1% (£42,000 x 1%= £420).
When taking into account this comparison and the fact that employer-met electric charging costs for staff EVs are tax-free (subject to certain conditions), the financial advantages to an employee are clear. If an employer offers EVs via salary sacrifice, it can also access further financial advantages.
Planning your switch to EVs
To support employers with the transition to EVs for their employees, BDO has designed a tax-robust approach to enable EVs to be provided through salary sacrifice arrangements. Our end to end EV solution can support you with:
- Understanding the tax and NIC and financial consequences across the range of EVs available on the market, through our calculator modelling tool
- The design of an EV arrangement which provides the best fit for your business
- The provision of comprehensive employee communication material which delivers the salary sacrifice arrangement
- Implementation practicalities such as payroll processes and best practice.