17th December 2019
Electric vehicles (EVs) generally cost more than their petrol or diesel equivalents to buy or lease, but while the initial cost may be significantly higher than that of a petrol or diesel vehicle, over time an EV fleet can be much cheaper to run and maintain.
Recent research suggests that large fleets switching to electric vehicles could potentially achieve annual savings in excess of £1.9m*
The Government is committed to helping increase the amount of electric vehicles on the road in order to meet ambitious climate change targets and ensure cleaner air quality in major cities.
The way motor tax is structured reflects this priority with a range of incentives like Benefit in Kind (BiK), salary sacrifice schemes, generous Government grants, National Insurance Savings and exemptions from Vehicle Excise Duty (VED)
The key financial benefits of adding Electric Vehicles to your fleet are:
Significant reduction in fuel costs
Businesses who opt for full 100% electric or extended range electric vehicles have the potential to make up to a four figure sum in fuel savings per vehicle each year – depending on the annual mileage. This is because the cost of electricity to charge an electric vehicle’s battery, is significantly less than the cost of filling up a conventional vehicle with petrol or diesel fuel.
Annual fuel savings will, of course, vary depending on how far the vehicle is driven and electricity tariffs. Plug-in hybrid vehicles also offer fuel savings since the electric motor increases the efficiency of the vehicle resulting in less fuel being used. Plus some journeys will be made solely using the hybrid vehicle’s electric motor.
Cheaper to maintain
Unlike petrol or diesel vehicles, which have dozens of moving components in their engine and transmission, EVs have a simple drivetrain, typically consisting of just three parts: an on-board charger, inverter and motor.
Since there are fewer moving parts in electric vehicles and they are not so hard on their brakes, the annual maintenance costs are significantly reduced. Servicing and maintenance of a fully-electric vehicle is estimated to cost between 25% and 40% less than that of a petrol or diesel car.
100% Discount on London’s Congestion Charge
Vehicles that meet the Euro 6 emission standard,.emit no more than 75g/km of Co2 and have a minimum 20 mile zero emission capable range are exempt from the current daily Congestion Charge of £11.50 and owners will only have to pay an annual £10 registration fee. From October 25, 2021 only pure electric vehicles will be eligible for this Cleaner Vehicle Discount. All other vehicles, regardless of their emissions status, will need to pay the congestion charge, unless they are registered for another discount or have an exemption.
Freedom to travel in the new Ultra Low Emission Zone (ULEZ) and Clean Air Zones (CAZs)
In the new London Ultra Low Emission Zone, petrol vehicles must meet Euro 4 standards to avoid charges and for diesel vehicle drivers, vehicles must meet Euro 6 standards. Transport for London (TfL) will be expanding the size of the ULEZ in 2021 and vehicle users will have to register to pay a daily charge or risk a £160 fine if they enter the zone in a vehicle that doesn’t meet the standards. Cameras capture the vehicle number plate automatically and check vehicle databases to find out whether the driver is liable for a charge.
Several UK cities have already implemented Clean Air Zones and more cities across the UK will follow suit in 2020. Driving in these areas may cost drivers if their vehicles don’t match environmental standards.
Benefit in Kind Tax (BiK)
Company car tax, officially known as Benefit in Kind Tax (BiK), is calculated based on the P11D value of the vehicle, its CO2 tailpipe emissions and the employee’s income tax band.
At present, company car drivers can make significant savings by choosing a low or zero emissions plug-in vehicle over an equivalent petrol or diesel vehicle. The BiK tax rate is set by HM Treasury and is set to undergo significant changes from April 2020 when savings on pure battery and efficient plug-in hybrid electric vehicles will increase dramatically.
From April 6th 2020 when the new lower rates become effective all BEVs will pay no company car tax in 2020-21, just 1% in 2021-22 and 2% in 2022-23.
Company car tax for cars registered before April 6 2020
Company car tax for cars registered after April 6 2020
Grants
Eligible plug-in vehicles benefit from government grants and tax incentives, which help to reduce the total cost of ownership and aim to make electric cars more affordable for businesses and their employees. The UK Government’s Road to Zero Strategy confirmed that these will continue to be available in some form until 2022.
Grants available across the UK include:
No Road Tax/Vehicle Excise Duty (VED):
To offer full support for those opting for the very cleanest cars and vans, the cost of annual car tax for 100% electric vehicles is zero. You do however still need to officially apply for road tax, in order to obtain confirmation each year that it is zero rated.
To be exempt, the vehicle must be an electric or hybrid car, with a battery that is charged by plugging in the vehicle and emits up to no more than 100 grams of CO2 per km. This covers nearly all electric vehicles on the market, with the only exceptions being amongst a couple of performance cars that emit a higher level of CO2. All cars that emit less than 75g/km CO2 will pay less road tax in the first year, delivering additional cash savings for plug-in hybrids on a company’s fleet.
Salary Sacrifice
Salary sacrifice car schemes are a popular benefit, allowing employees to sacrifice a portion of their monthly salary in return for a new car. Savings are generated because the employee is no longer liable for income tax on the proportion of the salary they sacrifice. It also has the added bonus of improving employee satisfaction and retention. ULEVs are eligible for tax benefits if purchased through a salary sacrifice agreement. As well as a reduced income tax liability for the employee, there is reduced national insurance liability for both parties.
Due to their wider societal benefits, ULEVs were exempted from the reforms announced in the Autumn Statement 2016 to remove the income tax and employer NICs advantages resulting from such schemes, whereby the taxable value of the BiKs provided through salary sacrifice is fixed at the higher of the amount of cash forgone or the amount calculated under the existing BiK.
* Deloitte Analysis Report: https://www.fleetnews.co.uk/news/car-industry-news/2019/10/10/large-fleets-could-save-19m-a-year-by-going-electric-says-deloitte
If employers want to provide a tax-efficient benefit for employees while also gaining green credentials, providing employees with electric cars is an increasingly attractive proposition.
Fuel Benefit Charge
There is no fuel benefit charge at all for electric employer-provided cars. Even better, there is no benefit-in-kind charge for employees charging their own cars at a workplace charging station – even where there is private use of the car.
The overwhelming benefit of EVs is environmental, since they produce no harmful emissions at the point of use. That means no carbon dioxide (CO2), no nitrogen oxide (NOx), and no particulates (atmospheric aerosol particles).
As a result, EVs can really help a business meet its sustainability goals. And this is especially true if you’re generating your own renewable energy to charge them.
Electric vehicles significantly help a company’s sustainability agenda and electric charging is one way of decarbonising business operations. If your fleet is electric, then around 30% of the electricity is from low carbon sources already thanks to clean energy sources across the UK – and that percentage is growing. Electric charging is therefore greener than using diesel and petrol
Company vehicles play a part in your brand image. So moving to electric vehicles can offer a strong message to your customers. An electric vehicle shows your organisation’s commitment to reducing energy consumption.
The image of a company’s brand can be boosted if people can see that the business is working towards an environmentally friendly fleet composition.
Those who oversee and administer company car fleets can make a big difference in a short space of time with a bigger focus on electric vehicles.
Now is the time to drive a cleaner future.
Stay tuned for part 8 next week, where we will be looking at Electric Vans.