Company cars usually come with a hefty benefit in kind charge which can often mean that they are not very tax efficient. However, from 6 April 2020, new rules for electric cars mean that these are now an attractive proposition.

For the employee: benefit in kind

The taxable benefit in kind value for a company car is based upon:

  • The manufacturer’s list price + the cost of optional extras x by a factor expressed as a percentage and usually determined by the car’s CO2 emissions.
  • That factor for the 2019/20 tax year, for electric cars and cars with CO2 emissions of 50g/km or less is 16%.
  • For purely electric cars (not hybrids), the applicable factors
    for future years are:

    2020/21: 0%   2021/22: 1%   2022/23: 2%

Therefore, the benefit in kind of a fully electric company car for the 2020/21 tax year is zero, no matter how expensive the car. For the avoidance of doubt, the list price of an electric car includes the cost of the battery even if this is acquired or provided separately.

For full details of tax on electric cars, including hybrids and the potential savings to be had under a salary sacrifice scheme, please download our factsheet below.