Company car EV - is it tax efficient??

katie279

katie279

katie279

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Hi all,

I've been mulling a new car (Tesla) and I'm aware I can get them through my company car scheme. I'm a higher rate tax payer, so I've heard that electric cars can be quite tax efficient, but I don't really know how to calculate the tax benefit/actual cost of them.

Does anyone have any pointers or ways I can work this out? I'm sure there's some boys toys website somewhere that'll have some calculator.... ;)
 
I've been looking at this too, quite a few websites will give you an idea of the tax hit for EV (even whatcar has a calculator) be aware though that it's creeping up (very slightly tbh) over the next year or two. Also keep in mind any potential pension impacts and or whether it has other indirect benefits through your net salary being lower - albeit this might only be applicable if you're borderline higher rate
 
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Yes, it's a bit of a muddle to calculate really - I 'think' I'd save about £500 off a £900 a month style lease.

No issue of borderline tax threshold, but I'm thinking about:
- Cost of petrol > electricity drops the cost per mile
- Cost of repair (we own our current mondeo, but have a Nissan Leaf - so would save off the Mondeo price)
- BIK advantage - as I say, I 'think' this works out about £400 a month off that I'd save off tax

So suddenly it looks relatively effective.
 
It is incredibly tax efficient, because the tax is significantly lower than an equivalent petrol or diesel engined car.
 
Yes, I guess I'm trying to work out 'how' tax efficient - ie I guess I don't really need a new car desperately, but I don't know if it's more cost effective to have one than keep my old car. Sorry, I'm a bit thick when it comes to cars and taxes and all that!
 
So being completely stupid - here's two models that I'm mulling:

Kia Sorento
1.6 T-GDi PHEV 4 5dr Auto

List price £54,140
CO2 emissions 38 g/km
Fuel Type Petrol/PlugIn Elec Hybrid
Benefit in kind (% charge) 11%
Benefit in kind (£) £5,955
Tax payable at 20% £1,191
Tax payable at 40% £2,382
12 months road tax £0
Insurance group 34D

Tesla MODEL Y
Long Range AWD 5dr Auto

List price £54,935
CO2 emissions 0 g/km
Fuel Type Electric
Benefit in kind (% charge) 1%
Benefit in kind (£) £549
Tax payable at 20% £110
Tax payable at 40% £220
12 months road tax £0
Insurance group


So I've got a 2015 Ford Mondeo, so I pay a certain amount of road tax each year on that, so over 4-5 years that'll add up.

But because I own it, I guess no tax will be payable? Although I'll be paying tax through my salary I guess, so does the fact I'll be reducing my salary to gain a company car mean I'll save a certain amount???
 
katie279 said:
So being completely stupid - here's two models that I'm mulling:

Kia Sorento
1.6 T-GDi PHEV 4 5dr Auto

List price £54,140
CO2 emissions 38 g/km
Fuel Type Petrol/PlugIn Elec Hybrid
Benefit in kind (% charge) 11%
Benefit in kind (£) £5,955
Tax payable at 20% £1,191
Tax payable at 40% £2,382
12 months road tax £0
Insurance group 34D

Tesla MODEL Y
Long Range AWD 5dr Auto

List price £54,935
CO2 emissions 0 g/km
Fuel Type Electric
Benefit in kind (% charge) 1%
Benefit in kind (£) £549
Tax payable at 20% £110
Tax payable at 40% £220
12 months road tax £0
Insurance group


So I've got a 2015 Ford Mondeo, so I pay a certain amount of road tax each year on that, so over 4-5 years that'll add up.

But because I own it, I guess no tax will be payable? Although I'll be paying tax through my salary I guess, so does the fact I'll be reducing my salary to gain a company car mean I'll save a certain amount???
Click to expand...
55k for a kia:eek:. At that price why would you buy if over a tesla or any other car?
 
Simply put you save yourself tax (inlcuding NI )at the marginal rate, and pay tax for benefit in kind. It so happens the gov is incentivising electric vehicles with a very generous BIK tax rate compared to normal cars, so it can be a very tax efficient way of getting a car at the moment.

So on the surface of it if you need a new car then it's a no brainer way to get one (electric one that is) since the BIK tax is so low currently... even more so the higher your marginal rate. If for example you're in the punishment band of 100-125k where you have a marginal rate of over 60% then you are basically getting a car at around 40% of the actual cost.

Where the fly gets in the ointment is that some schemes are better than others... they know you are getting a blinding deal from tax breaks and will sometimes charge you much more than the market rate knowing that it's still cheaper for you than going to a dealership, and they pocket the difference. So always worth comparing what they are asking for vs what the market rate for that car is, the savings may not be as big as they first appear.

The Sorento is a lovely car btw, sister in law has one and loves it... that said you are generally better off going full electric for maximising the savings due to the lower BIK tax - hence why the tesla is cheaper despite similar list price. As said though note that the tax is going up from 1% to 2% on full electric in april.... still much lower than hybrid.
 
My company is just about to start this so I’m thinking about it too, although a smaller car (ID3 or Tesla 3 sized).

I might have some bits wrong but broadly the way I’m thinking about it is the lease payment is paid out of gross salary so you save your marginal tax rate on that. In your example the monthly net payment would be £540 instead of £900 (since you save 40% due to paying no income tax on the amount). But you have to pay the BIK tax on top. As another poster suggested that will go up to 2% for the Tesla for the coming tax year. So that’s an extra £440 per year in tax which is £37 per month. So it will cost you £577 per month instead of £900 by doing salary sacrifice.

Another comparison you can make is looking at the total cost over 3 years versus buying the car outright. Assuming the 2% BIK rate stays the same for the next 3 years (next 2 are guaranteed I think but who knows about year 3) then the lease cost would be 36x£577=~£21k. If you owned the car you’d suffer depreciation (maybe £20k over 3 years?) plus insurance and servicing which is maybe another £2k. So the cost is quite comparable but you essentially borrow the money interest free by leasing.

If you are in the 45% band, the savings are even greater.
 
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