Electric vehicles now given a longer tax runway for take-off…
Piers Bambridge, CEO of Pike + Bambridge, examines the significant announcement regarding benefit in kind rates for electric vehicles (EVs) and what this means for employers in particular
The UK Government announced in the last Autumn Statement that it would continue to promote electric vehicle (EV) adoption by keeping the benefit-in-kind tax rates low for pure electric vehicles (BEVs) for a further 3 years at least.
Pressure from the fleet industry had recently focused on the lack of a coherent long-term plan and the dangers this could pose to the increasing uptake of EVs, with previous guidance only lasting until April 2025, meaning most company cars and salary sacrifice cars leased in 2022 were stepping into the unknown of what their tax rate would be before the end of their typical 3-4 year contract.
The Chancellor, Jeremy Hunt, announced that rates would now only rise incrementally from their current very low rate of 2%, with 1% added each year through to the 2028 rate of 5%.
How does this guidance affect EV adoption?
There are two main areas where this is relevant for those considering EV adoption. Firstly, the traditional ‘company car’ fleet providers are now able to plan their fleet with more confidence, and ideally accelerate the shift towards a zero-emission fleet.
Perhaps more impact will be felt to the broader business community by the relevance this has for EV salary sacrifice schemes, one of the faster growing areas of the automotive industry in the UK, and directly linked to the recent historically low tax position on EVs.
Recent YouGov surveys suggesting that only 18% of employers offer a salary sacrifice scheme to employees, whilst 73% of employees would ideally like such a benefit offered through their employment
Why EVs are increasingly an option for all?
Much has been made of the limited cost-effective choice and battery range of EVs, since Tesla launched their Model S in the UK back in 2016.
With there now being 36,000 chargepoints in the UK, in addition to the 18 million UK households with the potential to have a chargepoint installed in their home.
How long will this last?
Whilst the UK government is likely to see significantly reduced tax take from EVs (think road tax, BIK and fuel duty), this can probably be outweighed with the political imperative of being seen to be tough on climate change. Without the equivalent negatives of areas such as onshore wind, EVs also help reduce air pollution which has residual benefits for areas such as the NHS.
What is changing with the Benefit-in-Kind rates for electric vehicles?
The UK Government announced in the recent Autumn Statement that it would continue to promote electric vehicle (EV) adoption by keeping the benefit-in-kind tax rates low for pure electric vehicles (BEVs) for a further 3 years at least.
Pressure from the fleet industry had recently focused on the lack of a coherent long-term plan and the dangers this could pose to the increasing uptake of EVs, with previous guidance only lasting until April 2025, meaning most company cars and salary sacrifice cars leased in 2022 were stepping into the unknown of what their tax rate would be before the end of their typical 3-4 year contract.
The Chancellor, Jeremy Hunt, announced that rates would now only rise incrementally from their current very low rate of 2%, with 1% added each year through to the 2028 rate of 5%.
How does this guidance affect EV adoption?
There are two main areas where this is relevant for those considering EV adoption. Firstly, the traditional ‘company car’ fleet providers are now able to plan their fleet with more confidence, and ideally accelerate the shift towards a zero-emission fleet.
Perhaps more impact will be felt to the broader business community by the relevance this has for EV salary sacrifice schemes, one of the faster growing areas of the automotive industry in the UK, and directly linked to the recent historically low tax position on EVs.
Recent YouGov surveys suggesting that only 18% of employers offer a salary sacrifice scheme to employees, whilst 73% of employees would ideally like such a benefit offered through their employment
Why EVs are increasingly an option for all?
Much has been made of the limited cost-effective choice and battery range of EVs, since Tesla launched their Model S in the UK back in 2016.
With there now being 36,000 chargepoints in the UK, in addition to the 18 million UK households with the potential to have a chargepoint installed in their home.
How long will this last?
Whilst the UK government is likely to see significantly reduced tax take from EVs (think road tax, BIK and fuel duty), this can probably be outweighed with the political imperative of being seen to be tough on climate change. Without the equivalent negatives of areas such as onshore wind, EVs also help reduce air pollution which has residual benefits for areas such as the NHS.
What is more, the government currently remains committed to its 2030 banning of the sale of new petrol and diesel cars, with salary sacrifice and low BIK-rates a relative cost-effective method of accelerating towards that goal.
What next for employers considering salary sacrifice?
Firstly, it is important that any senior management team looking to implement a salary sacrifice scheme selects a provider that has experience within the service area, as the recent growth in adoption has brought a huge amount of relatively inexperienced, and under-skilled providers in what can be a complex marketplace.
In addition, it is important to ensure the provider offers a ‘fit’ to your existing employee benefits offering, with the likes of Tusker not typically offering their scheme to organisations with under 100 employees.
Does the provider meet our 3-point guide to ‘fit’?
Expertise – do they have a proven track record in this space? Are they associated with professional organisations?
Culture – what does their culture feel like? If you’re offering an employee benefit your employees will be engaging with, its important it matches your employee brand.
Pricing – don’t be fooled by the tax savings, what is the underlying price like for employees? What about hidden costs? Does the provider charge a ‘per order’ fee for their scheme?
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This blog is one of a series of articles from our commercial partners. The views expressed are those of the author and not necessarily those of ICAS.