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More bad news for the scheme.
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From April, company car tax will be scrapped for electric car buyers; experts predict big surge in demand for EVs
The electric car revolution is poised to hit the UK this year, but not because of purchase grants, green-shaming or European Union regulations. Instead, the expected sales boom is set to be driven largely by a change to company car tax regulations.
After the upcoming changes were announced in July 2019, sales of EVs doubled in the second half of the year compared with the first half, according to figures from the Society of Motor Manufacturers and Traders (SMMT). Business lease firm Alphabet reported a 165% rise in orders for plug-in vehicles.
The UK’s company car market is big business. Up to the end of November last year, 53% of cars sold went to fleets, SMMT figures show. Company cars aren’t free; they are a heavily taxed perk and, since 2002, the government has pegged the rate of duty to the car’s official CO2 emission figure. That move forced drivers out of thirsty petrol-engined cars and into more frugal diesels as companies sought to reduce the tax burden on their employees.
This year, however, the focus switches to plug-in cars. From April, people who choose electric cars will pay 0% company car tax: nothing at all.
“The fleet sector has a lot of pent-up demand, and this tax incentive could lead to a big surge in EVs,” said Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA).
Simultaneously, company car tax will for the first time be calculated using the CO2 figures generated by the new, tougher Worldwide Harmonised Light Vehicle Test (WLTP) regime. In short, the government is offering a huge, juicy carrot for drivers choosing electric and plug-in hybrid cars, and an extra whack of the stick for staying with conventional diesels or petrols.
How all this is worked out will already be familiar to company car drivers. The tax, known as benefit-in-kind (BIK), is expressed as a percentage of the car’s list price. For example, a Vauxhall Astra 1.2 turbo petrol with CO2 measured at 99g/km currently falls into the 23% tax band. That figure is further modified by the employee’s salary tax band, so those who earn more, pay more.
To give an idea of how generous the new tax rates will be, the driver of a Nissan Leaf EV currently pays between £871 and £1960 in company car tax, depending on their salary. From next April it falls into a 0% tax band, meaning they’ll pay nothing. That generosity from the government lasts only a year, but the following tax year the Leaf bill rises to just £54-£122, then £109-£245 the year after that (company car taxes rise annually with the same inevitability as rail fares).
t’s even more striking when you compare the figures for EVs against combustion-engined cars. While a Tesla Model S costing £97,700 will attract a 0% company car tax from April, a slightly cheaper Mercedes-Benz S450L AMG Line will cost the driver a whopping £13,116 a year in tax.
Preparations are under way. Hyundai, for example, has revised its EV range and is making sure cars are available. EVs such as the Kona small SUV have been in short supply, but that will change by April. “We expect there to be a surge for our fully electric vehicles and we will be seeing greater availability of those models this year and beyond,” said Ashley Andrew, managing director of Hyundai Motor UK.
Businesses are also revising their electric vehicle policies, some radically. Consulting and IT firm Atos, for example, now offers electric cars only to any new employee signing up to its company fleet scheme.
Charge point firm Pod Point, meanwhile, has reported “record” demand for installations at businesses over the past six months. “With the BIK change, we expect to see a massive increase in company car drivers going electric. It’s going to turn the industry on its head,” Pod Point CEO Erik Fairbairn said.
It won’t all go smoothly. The BVRLA’s Keaney points out that a surge in demand can only come if there are enough EVs available on the market. One Atos employee, who wanted to remain anonymous, grumbled that delivery times for new electric cars were so long that the policy had in effect imposed a ban on company cars.
Some companies, however, don’t offer their employees the option of an electric car. Sometimes this is because they have a deal with just one manufacturer, which might not yet sell an EV. For example, Serco and Capita, both service companies, only use Ford, which won’t have an EV available until the (pricey) Mustang Mach-E arrives late in the year.
Sticking with combustion-engined cars, however, is set to get more costly. Switching to the WLTP method of calculating CO2 for tax bands means that an Astra 1.2 jumps from its 99g/km emission figure to 119g/km. After some pressure, the government adjusted the bands to account for the WLTP jump, but our sample Astra still goes from a 23% band to 26%, costing drivers more. “The reduction in rates for two years is unlikely to compensate drivers fully for the increase in emissions,” said Caroline Sandall, chairman of fleet industry pressure group ACFO. She also pointed out that because of December’s general election, the changes haven’t yet been made law.
The changes also benefit plug-in hybrids, fleet sales of which have exploded since the July announcement. SMMT figures show that in the second half of last year, three out of four of new PHEVs sold went to fleets. The new tax rules benefit longer-range plug-in hybrids. For example, the new BMW X5 xDrive45e, with an electric range of 54 miles, will fall into the 6% tax band from April, rather than the 12% band it would have been in if BMW had stuck with the previous version’s 20-mile range.
Of course, what the government gives it can also take away. After April 2023, it will have the power to create new tax bands. By that time, however, the temptation of cheaper motoring will have persuaded thousands of company car drivers into switching to plug-ins.
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.
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Obviously these tax breaks will have to
end eventually. The government will need to recoup the tax lost from petrol/diesel fuel and cars as they become rarer on the roads.
Great news for the environment promoting ev’s though ??
Yes the incentives will end but before they do we will not get any advantage from them. The demand from fleets will put motability last on the list and that means we will get what they don’t want.
jeff your correct it is great for the environment no doubt about that.
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.
Not really that great for the enviroment with the making of the batteries. Plus the charging of them.
Craig surely you don’t believe internal combustion engines using fossil fuels are better for the environment?
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.Maybe not, but Hybrids are just as bad as petrol & diesel. Electric cars are hyped up to be 100% green which they are not.
I agree Craig nothing is perfect but we are getting there, I reckon within the next few years solid state batteries will be with us making charging a doddle both in time to charge and increase in range.
Wind energy now makes up about a third of our energy needs and with more EV batteries charging at night the power generated at night won’t be shut off as it is just now.
We are also expecting cheaper V2G (vehicle to grid) chargers to come on stream soon allowing electricity to flow to and from car batteries. Meaning you can charge your car at night then use the electricity from the battery to run your home during the day, reducing the load on the network.
Interesting times Craig.
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.I’m sure I read somewhere ab0ut the being a country where a lot of the cars have solar panels on the roof, so people leave them plugged in constantly – if and when the car battery is full, excess power is fed back into the system and some people claim (obviously take it with a pinch of salt) that the running cost of the car is actually below zero as the car self charges during the day, and the occasional power draw for the car charge is more than paid for by the excess fed back in.
I have my doubts purely based on the size of panel which can fit on a roof of a car when you compare it to the full house setups which still don’t cover everything but any step in the right direction has to be a good thing.
"Man is born in freedom, but he soon becomes a slave, in cages of convention, from the cradle, to the grave."
I’m in the same camp as you Colin, you would need to stay in a very sunny country and drive very few miles for this to work. Having said that the solar panel can give you about tennish additional miles per day in the right conditions, allegedly.
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.At the end of the day, Motability is a nothing but a very large fleet, it has the same bargaining power as other fleets. Granted APs might not be ultra low but that doesn’t mean the cars won’t be on the scheme.
What’s great about this is that it will increase demand but demand from canny fleet managers who want value and low running costs, demand is great for competition and nothing moves innovation on faster than competition. All those reps aren’t going to be allowed to b idle for hours charging, they’re going to be wanting range and fast charge times! Lol.
But its not the same as other fleets Bandit, you just have to look at the cars on offer from other fleet companies to see that.
The other fleet companies do not appear to be as risk adverse as motability, as can be seen by the number of BEVs they have available. Motability have many advantages over other fleet companies such as VAT free cars and insurance and not to forget the biggy, an ALMOST captured customer mass of over 600,000 people.
Motability should be THE UK fleet but because of their business model they are IMO nearer the bottom, pushing cars the other fleets don’t want.
The only person who got all his work done by Friday was Robinson Crusoe.
Anything i post over three lines long please assume it is an article lol.Less not forget 2017 when companies were given tax breaks for cars like the Mitsubishi Outlander PHEW where they took the Queens shilling then ran the cars on 100% petrol or diesel.
I know they can’t do that with all electric but I’m sure they will find loop holes that will bugger everything up for us before we’ve even got off the starting line.
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