Company car tax for electric cars

The benefit is private use, not the badge on the boot

If a limited company or employer makes a car available for private use, a taxable benefit usually arises. That includes commuting. Pool cars that never go home and are used only for work can fall outside, but the conditions are strict.

The cash equivalent uses the car’s list price (plus certain accessories) multiplied by a percentage. For zero-emission cars that percentage has been far below petrol and diesel. Parliament has already legislated stepped increases in later years — check the GOV.UK table for the tax year you are in.

Hybrids, vans and charging

Plug-in hybrids use different percentages driven by CO2 and electric range. Vans have a separate van benefit regime. Workplace charging of a company electric car is often not a benefit; charging an employee’s own car can be.

Fuel is another axis. Electricity is not treated like petrol fuel benefit in the old way, but you still need a clean policy so directors do not mix personal supercharger bills into the company without a method.

• Keep the list price invoice, not just the discounted amount you paid.
• Report the benefit through payroll or P11D as required for that year.
• Class 1A National Insurance on benefits is an employer cost — budget it.

Salary sacrifice still needs a genuine change

Swapping salary for a car has to meet the optional remuneration rules. A poorly drafted sacrifice can tax the greater of the salary given up and the car benefit. Have the numbers run before you order a fleet of SUVs.

Solaratax calculates benefits for directors and small fleets as part of payroll. Send us the vehicle list if year-end P11Ds have been guessed in previous years.

Questions we are asked

Is a company electric car tax-free?

No. It is usually a low percentage of list price, not a nil benefit, unless a specific exemption applies (for example some pool or emergency vehicles).

What if I pay for all private miles?

Paying for fuel does not by itself cancel the car benefit. There are reductions if you reimburse the full benefit, which almost nobody does accurately.

Do sole traders have company car tax?

Sole traders do not have a ‘company’ car. They may disallow a private-use slice of motor expenses instead. Directors of their own company are in the benefit-in-kind world.