My father was a 'commercial traveller' who covered an area from Swindon to Land’s End, Portsmouth to mid-Wales selling curtains and furnishings for his employer from the 1950s to 1970s.
He changed his car every 18 months, Morris Oxford to Ford Granada, as he was driving 25,000 miles a year. In those days commercial deals were done through personal contact and a handshake, rather than online. Incredibly in the current anti-pollution climate, company car users used to benefit from a tax reduction the more mileage they drove on business. I imagine he would now be called Head of Sales or Marketing and would be driving a clean Hybrid or Electric car (when not on Zoom calls!)
In fact, a 100% electric car, why not?
His employer can claim a First Year Capital Allowance on the cost of the car to reduce their taxable profit.
The car user is currently taxed on the perk of the availability of a pure electric of zero percent of the list price (RRP) of the car- even if it is a £70,000 Tesla or Jaguar I-Pace. That is not a mistake, the employee pays no tax on the benefit - at least until 6 April this year.
Although the taxable benefit will then increase to 1% and 2% until April 2025, that compares with a typical benefit on petrol cars of 35% of list price. Company cars are generally unpopular these days as the driver has often paid tax on the full RRP of the car in three years, so their employer might almost as well have given them the car on day one.
But when electric cars enter the equation, a sales person earning over £150,000 would pay only £630 tax on the benefit of using a £70,000 car. His boss with a petrol BMW X7 would pay £12,820 tax. Who is better off?
In addition, electricity is not 'fuel' so there is no taxable benefit if the employer pays for the re-charging and non-business travel.
If that was not tempting enough:
- a zero emission car can be provided under salary sacrifice (although that can involve other negative points)
- no congestion charges
- no road fund license cost
- Government subsidy up to £3,000 for cars costing less than £50,000
- tax free availability of charging points at employer‘s premises (but not at the employees’ home).
So, Dad, forget about the BMW X7, it is time to go electric...the only drawback is that there are not yet that many charging points in West Cornwall!
The next step
For more information on the tax advantages for electric cars, please get in touch.
