Graham Farquhar

Written by:

Graham Farquhar

Partner

The future's bright, the future's electric

Last week’s launch of the Tesla 3 has been heralded as the start of the mass production of electric vehicles. Unfortunately for UK drivers it is being reported that it is likely to be late 2018 or early 2019 before the Tesla 3 will be available in the UK. The increasing number of electric and hybrid vehicles means that Britain’s 500,000 company car drivers will be giving serious consideration to Ultra Low Emission Vehicles (ULEVs). 

Over the coming years there are a number of tax breaks that will make ULEVs and electric cars in particular very attractive. First is the fact that ULEVs are not impacted by the recent Optional Remuneration Arrangements (salary sacrifice) changes whereby an employee is taxed on the higher of the company car benefit or the cash alternative that has been waived. 

Secondly and more importantly is the fact that from 2020 there will be a change in rates for ULEVs meaning those who have greater range on a charge will have significant tax advantages. Outlined below is a table of some ULEVs and on the assumption that the Tesla 3 was available today what the taxable benefit would be for each in 2017/18 and also 2020/21. We have assumed a list price of £35,000 which is what is reported for the Tesla 3. 



    Car: 
      BMW i8       Tesla 3      Renault Zoe 
                   
List price (£)     104,000      35,000      14,245 
                   
2017/18 - Benefit percentage of list price (per cent)      9        
                   
2017/18 - Benefit in Kind (£)      9,360      3,150      1,282 
                   
2017/18 - tax payable by 40 per cent taxpayer (£)      3,744      1,260      512 
                   
2020/21 - Benefit percentage of list price (per cent)      14         
                   
2020/21 - Benefit in Kind (£)      14,560      700      285 
                   
2020/21 - tax payable by 40 per cent taxpayer (£)      5,824      280     
114                                                                

Electric cars emitting 0 or 1-50 g/km CO2 and able to travel 130 miles or more would also have a benefit in kind rate of 2 per cent, while models that cover less than 30 miles on electric power would have a benefit in kind rate of 14 per cent. By comparison any vehicle emitting over 160g/km would be taxed on a benefit in kind rate of 37 per cent. For instance, a £41,000 high performance BMW 4 series would fall in this category. 

It is unlikely that this will last forever but for a company car driver taking delivery of a Tesla 3 in 2019 it is likely that they will enjoy one of the most tax efficient benefits available – a £35,000 car at a cost of just over £5 per week. 

And that is not all! Should the Tesla 3 driver decide to make use of the Autopilot technology and splash out on the extra cost of the Enhanced Autopilot package costing what is likely to be an extra £5,000 and the Full Self-Driving Capability option needing an extra £3,000 on top of that, they will effectively be getting a chauffeur driven car! With a benefit in kind percentage of just two per cent it means this would only cost a higher rate tax payer £64 a year in tax! 

All this could mean that company cars will not only become more popular but also have an environmental benefit. 

 
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