Digital Accountancy for Worcestershire, the West Midlands and the UK

Electric Car Tax Changes

Ever dreamed about driving a Tesla? Well, maybe the tax system can make that a reality in 2020.

Company cars provided to employees were once a distinguishing feature of the UK labour market. Successive tax increases on benefits in kind have sought to demonise the provision of cars by employers such that it is almost impossible, except for very high mileage drivers, to justify taking a company car on financial grounds alone.

The growing significance of the contribution that electric cars can make to the climate change debate has led the government to offer a significant tax advantage to those who choose this type of company car.

Between 6 April 2020 and 5 April 2021 the benefit in kind tax rate for a wholly electric vehicle will be 0%.  It is currently 16%.  In the following tax year it will be 1% and then 2% in 2022-23.

For someone fortunate enough to be given a Tesla Model S this is equivalent to a tax saving of more than £16,500 over 3 years.  For the equivalent variant of the smaller Model 3 the tax saving over the same period is almost £9,500.

Of course, there are other options for electric cars that do not have quite the same price tag as the illustrious Tesla models with offerings from BMW, Volkswagen, Nissan and Hyundai amongst others.   Prices are though still somewhat higher than for the conventionally powered models of these manufacturers.   It can only be hoped that the shot in the arm given by the tax system can drive producer volume and lower prices all round.

Meanwhile, I’m off to the Tesla store to continue my dreaming!

This page deals with tax matters
While we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error-free and up-to-date information, the information on this page does not constitute advice. Your individual circumstances are important, and we recommend you always obtain specific professional advice from us or another accountant before you take any action or refrain from action.


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