How much is electric company car tax: full guide

We explain the current and future UK company car tax rules for all-electric, plug-in, and standard hybrid vehicles

James Wilson
Dec 11, 2018

The amount of tax you pay for the privilege (or benefit-in-kind as it is also known) of a company car, is calculated using three variables: your income tax band, the car’s list price when new, and a car’s carbon dioxide (CO2 emissions).

The weighting of these variables changes yearly as decided by the UK government, changing how much tax you pay, with a major reshuffle set for 2020. The changes will impact electric vehicles (EVs) the most, due to electric range being taken into account as well as CO2 emissions.

It doesn’t matter if you charge your EV (be it an all-electric car or plug-in hybrid) with electricity generated from renewable sources or not, in the eyes of the UK government miles driven using electrons and not petrol or diesels count as emission-free motoring. Which is why EVs can drastically cut your company car tax bill.

As an example, if you are a basic rate income tax payer i.e. 20 per cent, a brand new Volkswagen Golf GTI would have cost you £1,780 for the 2018/19 tax year. Whereas a Volkswagen Golf GTE (the hybrid equivalent to the GTI and around £1,500 more expensive) would have set you back just £807. Add to that the fact you can hope to achieve around 20 miles of pure electric driving with the GTE, and you can see that those with a modest commute can make huge savings on fuel as well as reduced company car tax.

As company car regulations currently change yearly, we have broken down what this means for drivers by tax years. Starting with the current tax year and ending with the 2020/21 year below will help guide you to the best electric company car.

Electric company car tax for 2018/19

Below is a table that breaks down the company car tax bands (defined by CO2 emissions) that electric cars will be in. In total there are 29 bands, but those further up the scale are only really applicable to higher emission petrol and diesel cars, so have been omitted here. It is worth noting when looking around manufacturers websites, the percentage of a car’s P11D value you pay tax on, as deemed by its CO2 emissions, is often referred to as it’s BiK (benefit-in-kind) rate.

CO2 emissions per kilometre

Percentage of electric car list price you pay tax on in 2018/19

0

13

1 - 50

13

51 - 75

16

76 - 94

19

95 - 99

20

Based on the latest UK government new car emissions data, if you want to qualify for the lowest possible company car tax (i.e. 13 per cent) you have to opt for an electrified car. This does not mean you are stuck for choice though, as the market is awash with options. Here are five as an indication of the range:

Hyundai Kona electric 
Jaguar I-Pace  Nissan Leaf
Toyota Prius plug-in hybrid BMW 3 Series hybrid (saloon)

As a comparison to EVs, based on the same government data the lowest emission petrol car currently available is the Fiat 500 which emits 88g/km of CO2. This means you will pay tax on 19 per cent of its list price.

Similarly, the lowest emitting diesel is the Ford Fiesta, which emits just 82g/km of CO2. However, there is an additional penalty of 4 per cent for running a diesel.

 

Electric company car tax for 2019/20

For the 2019/20 tax year, the amount of tax you pay in each band is being increased – the implications for electric cars is that you will pay tax on an additional 3 per cent of a car’s list price. Similar to the above, we have broken down what this means for the tax bands electric cars will be in.

CO2 emissions per kilometre

Percentage of electric car list price you pay tax on in 2019/20

0

16

1 - 50

16

51 - 75

19

76 - 94

22

95 - 99

23

As the range of CO2 emissions for each tax band won’t change – i.e. 1-50 g/km of CO2 is still the second lowest band – this shouldn’t affect the cars which can be scooped up, just the amount of tax you pay.

 

Electric company car tax for 2020/21

Big changes are afoot for company car tax bands in 2020, with low emission vehicles (namely EVs) set to benefit the most. From 2020 the UK government is redefining the bands a car can fall into. While there were previously five bands an EV would likely qualify for (as shown in the tables above), there are now 16.

Furthermore, hybrids which come with better pure-electric range will be rewarded, with five of the new bands being sub-bands for cars which emit 1-50 g/km of CO2. At the bottom end of the scale, hybrids which can travel fewer than 30 miles on electric power alone, will face a tax rate of 14 per cent. While those hybrids which can travel for more than 130 miles will only be taxed 2 per cent. The table below explains further.

CO2 emissions per kilometre

Percentage of electric car list price you pay tax on in 2020/21

0

2

1 - 50

Electric range of 130 miles or more

2

Electric range of 70 - 129 miles

5

Electric range of 40 - 69 miles

8

Electric range of 30 - 39 miles

12

Electric range of fewer than 30 miles

14

51 - 54

15

55 - 59

16

60 - 64

17

65 - 69

18

70 - 74

19

75 - 79

20

80 - 84

21

85 - 89

22

90 - 94

23

95 - 99

24

What the above means is you will need to be even more careful when looking at company cars to make sure you aren’t missing out on savings.

It is important to remember, is that unlike vehicle excise duty (known by most as road tax) which is set for a car’s life, company car tax changes with the tax year. For example, if you opted for a Nissan Leaf in the 2019/20 tax year, you would be taxed on 16 per cent of its list price. After the changes in 2020, however, you would pay tax on 2 per cent.

If you're looking for a company car and you can live with a fully electric vehicle, our advice would be to go for one, provided that its list price is relatively close to a hybrid equivalent. If a pure-electric car does not fit with your lifestyle, then you should strongly consider a plug-in hybrid.

Look for a model which has a big electric range, so on top of saving fuel (provided you plug it in regularly) come 2020, you will reap the rewards of a reduced tax rate.

     
     

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