Electric Cars – Some Welcome Good News

Published 5 June 2020
in New Vehicles
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With the understandable focus having been on the COVID-19 pandemic, one thing that has largely gone unnoticed for many people is the drastic change to the rules around company car tax (benefit in kind), in relation to electric and hybrid cars, and the opportunity this brings.

Whilst remote working offers the likelihood of less mileage being driven by the UK’s 35 million vehicle-strong fleet, the number of cars on the road is actually projected to increase, due to the fears over public transport and the move away from things like ride-share schemes.

It is helpful, then, that the UK government’s tax change to company car tax has landed at this time, with zero emission cars the undoubted winners, good news for all of us with regards to air pollution in our cities.

The benefits are wide-ranging for both employers and employees.  We have attempted to introduce a high-level summary below:


Directors of SME limited companies are likely to receive the greatest benefit, with one recent study showing that the average director could save as much as £10,000 annually in True Cost of Ownership (TCO) through the savings in VAT, corporation tax, income tax and running costs.  At times like this, the ability to potentially cut costs and support the environment are attractive to many companies.


The benefits for employees are also encouraging.  Recent years have seen a move away from company cars as the benefit in kind tax, on diesel cars in particular, made it financially a poor decision for both employer and employee.

Those who receive a cash allowance pay income tax on that gross salary allowance, at whatever rate band they are in, with a company car (if fully electric) attracting no such tax as a benefit. 

The ability to offer what is effectively a pay rise by offering an electric company car, whilst reducing company costs and environmental impact.


The move in benefit in kind tax from 16% to 0% for electric cars also has an impact on the National Insurance contributions employers make, a further benefit of the recent change.

Employers, then, have an opportunity to offer a benefit to employees, with the net effect of actually saving the employer money.  With company cars also offering a greater degree of control, and compliance for the employer.

All of these benefits are most accutely felt in the 2020-21 tax year, so the time is now to review the possibilities.

Please get in touch with our team if you would like to review how electric vehicles may help in your business.

Pike + Bambridge do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. 


If you’d like more information, please do get in touch with an expert account manager today, on 0131 563 7493, or sales@pikeandbambridge.co.uk. for more specific guidance to suit your individual need.