Employees are required to pay income tax on any benefits that they receive from their employer. The benefit in kind for company cars is calculated based on the car’s C02 emissions and the list price of the vehicle.
From 6 April 2020, the benefit in kind for fully electric cars is being reduced to 0% for the tax year 2020/2021. The Government’s summary of responses document published in July 2019 confirmed that:
“All zero-emission company cars will attract a reduced appropriate percentage of:
- 0% in 2020/21
- 1% in 2021/22
- before returning to the planned 2% rate in 2022/23”
These reduced rates are applicable for cars registered before and after 6 April 2020. The July 2019 review can be found at:
The advance of these reduced rates will reduce the employee’s income tax liability, and save employers on their Class 1A National Insurance liability.
Fully electric cars will not have any fuel scale rate charges applied to them, as electricity is not a fuel. For reimbursement of mileage, you would use the approved electricity rate of 4p per mile. This rate is published under Advisory Fuel Rates on Gov.UK and the latest rates can be found at:
There are also tax advantages if you provide your employee with charging facilities at your workplace, and even for the installation of a vehicle charging point to be installed at the employee’s home.
For further guidance on the tax treatment of charging and mileage payments due to an employee using a fully electric vehicle, please see the below EIM reference: