Lowering the Benefit Tax – How Kind!
For those who use company cars, you will be very familiar with the term ‘Benefit in Kind’, or BIK for short. For those who aren’t familiar with BIK, it is the amount of tax that the employee will have to pay for the use of a company car. The amount of tax payable depends on the list price of the car and the Co2 emissions it produces.
The chart, below, breaks down how the BIK tax works on the Renault ZOE and the BMW i3 for a tax payer in the 20% tax band:
||2017/2018 BIK 13%
||Tax Payable 20%
||2020/2021 BIK 2%
||Tax Payable 20%
||Saving per Year For the Employee after fall in BIK Rate
The 13% rate will be rising to 16% for the tax year 2019/2020, and it was due to rise again to 19% in 2020/2021. However, the big Benefit in Kind EV news is that the Government has introduced a brand new sliding scale, whereby all zero emission vehicles will be subject to a 2% Benefit in Kind rate. This is a huge drop from the 19% originally planned for 2020/2021, the year the new sliding scale comes into force. This is the clearest sign yet that the Government is really pushing for businesses to switch to electric vehicles for use as company cars.
The changes to the BIK rates were first announced in the autumn statement of 2016 as part of the Government’s plan to drive the UK towards a zero emissions future (known as the ‘Road to Zero’). A total of 15 new BIK bandings have been introduced, with 11 of these bandings being for ultra-low emission vehicles (ULEVs). The British Vehicle Renting and Leasing Association (BVRLA) believe that the new bandings will encourage employers and employees to take up the use of electric vehicles well ahead of the change in new car legislation that is due to come into force by 2040.
As well as the BIK rate changes, the Government also announced in the same statement that a further £390m will be invested by 2020/2021 to support ULEVs, renewable fuels, and connected and autonomous vehicles. This figure includes £80m which has been set aside for the development of charging infrastructure.
This is all wonderful news for everyone involved with electric car fleet hire, such as EVision Electric Car Hire. When the new banding comes into force, an employee would only have to pay around £101 BIK if you hire a Renault ZOE from EVision Electric Car Hire, or around £132 BIK if you were to hire a BMW i3 from EVision Electric Car Hire. For people in higher positions within a company, you may wish to hire a Tesla and make the most of the lower tax rate.
But why wait until 2020 to rent an electric car for your fleet? Even at 13% or 16%, as it will be next year, the BIK on electric cars is already much lower than petrol or diesel cars. Not to mention far cheaper to run and far more reliable. Plus, if you need to travel in London, there is no congestion charge or T-Charge. The benefits are already there, and they are very kind indeed.
Visit our website at www.evrent.co.uk for more information or to make a booking enquiry.
Alternatively, you can call us on 01634 914 063. We look forward to hearing from you.