Driving Forward: Navigating BiK Taxation for Electric and Hybrid Company Cars in the UK

Driving Forward: Navigating BiK Taxation for Electric and Hybrid Company Cars in the UK

As the automotive industry undergoes a transformative shift towards sustainability, the adoption of electric and hybrid vehicles in corporate fleets is gaining momentum. In the United Kingdom, understanding the nuances of Benefit in Kind (BiK) taxation is crucial for both employers and employees exploring the benefits of electric and hybrid company cars. Let’s delve into the specifics of BiK taxation, highlighting the favourable rates associated with electric and hybrid vehicles.

Deciphering BiK Taxation for Electric and Hybrid Cars: BiK taxation for electric and hybrid company cars in the UK is influenced by various factors, including CO2 emissions, electric range, and fuel type. Here’s a breakdown of the specific rates and incentives:

BiK Rates for Electric Vehicles (EVs):

• For the tax year 2023/24, electric vehicles are subject to a BiK rate of 2%.
• This rate is significantly lower than that of traditional petrol or diesel cars which would typically attract BiK rates of 25-30%, reflecting the government’s commitment to incentivize the adoption of zero-emission vehicles.
• The 2% BiK rate applies to electric cars regardless of their list price, making them an attractive option for both employers and employees.
• So, if you buy an electric car for say £50,000 the additional income liable to income tax would be £1,000. For a 40% band income tax payer this would therefore cost only £400 in additional tax.

BiK Rates for Plug-In Hybrid Vehicles (PHEVs):

• Plug-in hybrid vehicles enjoy lower BiK rates compared to conventional combustion engine cars, with rates determined by their electric range and CO2 emissions.
• PHEVs with zero-emission ranges of 130 miles or more qualify for the lowest BiK rates.
• For PHEVs with CO2 emissions below 50 g/km and an electric range of at least 130 miles, the BiK rate for the tax year 2023/24 is set at 2%.
• If a PHEV can travel less than 30 miles in battery mode it gets a 14% BiK rate for the next three financial years.
• If a PHEV can travel 30-39 miles in battery mode it gets a 12% BiK rate for the next three financial years.
• If a PHEV can travel 40-69 miles in battery mode it gets an 8% BiK rate for the next three financial years.
• If a PHEV can travel 70-129 miles in battery mode it gets a 5% BiK rate for the next three financial years.

Exemption from Fuel Benefit Charge:

• Employees driving electric company cars are exempt from the Fuel Benefit Charge, providing additional tax savings.
• This exemption further incentivizes the adoption of electric vehicles and reduces the overall tax liability for employees.
• Benefits of Electric and Hybrid Company Cars: The favourable BiK rates associated with electric and hybrid company cars offer a host of benefits for both employers and employees:

1. Cost Savings: Lower BiK rates translate to reduced tax liabilities for employees, making electric and hybrid company cars an attractive and cost-effective option.
2. Environmental Sustainability: Electric and hybrid vehicles contribute to reduced carbon emissions, aligning with corporate sustainability goals and environmental initiatives.
3. Enhanced Corporate Image: Embracing electric and hybrid technology demonstrates a commitment to sustainability and corporate responsibility, enhancing brand reputation and attracting environmentally-conscious talent.

Employer Considerations: While the tax incentives for electric and hybrid company cars are enticing, employers should consider several factors:

1. Charging Infrastructure: Adequate charging infrastructure is essential to support electric vehicles in the corporate fleet, requiring upfront investment and ongoing maintenance.
2. Financial Planning: While electric and hybrid vehicles offer tax advantages, companies must carefully evaluate the total cost of ownership, including acquisition costs, charging infrastructure, and potential residual values.

The favourable BiK rates for electric and hybrid company cars underscore the UK government’s commitment to promoting sustainable transportation solutions. By understanding and leveraging these tax incentives, employers can accelerate the transition towards greener fleets while providing cost-effective and environmentally-friendly mobility options for their employees. As the automotive industry continues to innovate, electric and hybrid vehicles are poised to play a pivotal role in shaping the future of corporate mobility in the UK.