With the cost of living crisis and inflation chipping away at consumer wallets, purchasing an electric vehicle (EV) may not be at the top of everyone’s shopping list. The large upfront cost to purchase vehicles remains a significant deterrent for consumers. Although three-quarters of drivers plan to buy an EV at some point in the future, 80% believe that battery electric cars are currently too expensive. But as 2023 has so far seen a more than 19% increase in registered BEVs on the road compared to the same point in 2022, how then are EVs still seeing record growth? Company cars on the rise Rather than coughing up large sums of money for the upfront costs of EVs, many are instead deciding to take advantage of company car and tax relief schemes. Through Benefit-in-Kind (BIK) car tax - the additional money paid by staff to allow them to use vehicles outside of work hours - employees could potentially save thousands of pounds a year by making use of a new electric car. The tax relief on electric fleets is one of the biggest reasons why company cars are becoming so popular again. Recent HMRC data showed a 13-fold increase in electric company car uptake in 2022 as BIK tax rates were cut for zero-emission vehicles. The difference in overall costs compared to petrol or diesel-engine vehicles can be substantial. Whereas internal combustion engine (ICE) vehicles currently pay upwards of 20% BIK tax, electric vehicles pay just 2%. For a petrol-powered Peugeot 208 at a recommended retail price (RRP) of £20,300, employees would pay more than £4,000 a year if the BIK tax was the basic rate of 20%. A Peugeot e208, with an RRP of £31,300, would see 56 AFTERMARKET NOVEMBER 2023 EVS AND HYBRIDS www.aftermarketonline.net Will Benefit-in-Kind tax changes put off EV company car schemes? owners pay just £626 a year. Why is BIK tax changing? To encourage and grow the uptake of low-emissions vehicles, BIK tax has tended to be very low. In fact, before the introduction of 1% rates in 2021, EVs were completely exempt from paying any BIK tax. The 2% BIK rate is currently fixed until April 2025, with 1% year-on-year increases planned until at least 2028. With the UK’s finances in dire straits, new and higher tax rates becomes the go-to strategy to try and balance the coffers. In doing so, however, it could have an adverse effect on the electric vehicle market and the appetite of consumers to switch to more sustainable modes of transport. Although the total costs of EVs will become a little bit more expensive, the benefits and savings still far outweigh the costs. Employees that opt for a company electric vehicle through salary sacrifice schemes can save up to 63% BY Alok Dubey, UK Country Manager at Monta ARE FRIENDS (WITH BENEFIT-IN-KIND) ELECTRIC?
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