Employee choice

Benefits in kind drive electric car demand

Tesla Model 3 is among the cars in demand

Attractive benefits in kind rates for electric cars and increasing concerns over climate change is driving soaring employee demand for company supplied electric cars, according to Azets, the UK’s largest regional adviser to SMEs. 

The annual income tax and NIC costs for a £15,356 petrol Corsa SE for a 20% taxpayer are £968 and £7,757 for 40% taxpayer acquiring a £48,000 diesel BMW. 

The equivalent costs for a £34,400 Nissan Leaf for a 20% taxpayer are just £189 and £534 for a 40% taxpayer and a £48,500 Tesla.

In order to help SME’s equip employees with E cars as part of their benefit packages, Azets has partnered with Total Motion, a major UK fleet management and leasing business that specialises in providing salary sacrifice car schemes through Pink Salary Exchange, a separate trading company.

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Azets will focus on providing advice to businesses on tax planning whilst Total Motion will match customer demand with the most appropriate marques. 

Commenting on the dramatic growth in BIK demand for company E cars, Mark Pryce, tax partner with Azets in Scotland said: “Around 90% of our advisory work on company cars used to involve internal combustion engines (ICE), with the remaining 10% covering electric – now the market has reversed.

“The demand is also being fuelled by businesses that are adopting ESG (Environmental, Social and Governance) frameworks and want to switch from fossil fuels.

“Companies are also looking to pre-empt any bans on diesel and petrol vehicles arising from inner city controls and government plans that more than 50% of all new cars sold should be fully electric by 2028.”

Demand for new electric cars is borne out by industry data – nearly 191,000 were on the roads in 2021, an 11.6% share of the new-car market in the UK, and there are now more than 470,000 electric cars on the roads.

Mr Pryce added: “According to industry forecasts, one in six new cars will be fully electric this year with numbers accelerating as the supply chain improves and the charging infrastructure grows. 

“The BIK regime for electric cars is highly attractive just now and we would encourage any businesses interested in providing employees with E cars to take advantage of the tax regime sooner rather than later.”

Total Motion director Simon Hill said: “Our partnership with Azets is helping decarbonise road traffic as more companies look to the environmental, tax, staff retention and reputational benefits of pure-play electric vehicles for directors and employees.  From 2030 there will be a total ban on the sale of new petrol and diesel cars. That cut-off date is focusing many minds.”

Examples of the tax rates between EV and Petrol/diesel cars:

Vauxhall Corsa SEBMW 330d M SportNissan Leaf TeknaTesla Model 3
Fuel TypePetrolDieselElectricElectric
List Price £15,356£44,035£34,440£48,490
CO2 Emissions (g/km)93137NilNil
2022/23 BIK (%)23%32%2%2%
Cash Equivalent£3,530£14,091£689£970
Employee Marginal Tax Rate20%40%20%40%
Income Tax on BIK£706£5,636£138£388
Class 1A NI costs£262£2,121£51£146
Tax Saving (employee)£568£5,249
Class 1A NI saving (employer)£211£1,975
Total Tax Charge£968£7757£189£534

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