HOW BENEFIT IN KIND CAN HELP YOU DRIVE AN ELECTRIC VEHICLE FOR ALMOST FREE!
Benefit in Kind is capped at 2% on all electric cars until 2025.
Benefit in Kind is capped at 0% on electric vans until 2025.
As a result, employers and employees can make substantial savings on Tax and National Insurance.
HOW DO I GET AN ALMOST FREE EV?
OPTION 1 – BENEFIT IN KIND
If an employee drives a car for business purposes and also has the car for personal use, they are taxed by the Government. However, if you choose an electric car you will only pay 2% Benefit in Kind Tax until 2025. In regards to electric vans, you will pay 0% Benefit in Kind until 2025.
OPTION 2 – SALARY SACRIFICE
If you don’t have a company car or van you can still access these benefits using the salary sacrifice scheme. Here, an employee and employer sign an agreement (which EVision can provide). The employer pays for the car or van and the employee takes a reduction in salary in exchange. The employer saves money on the reduction in order to pay for a fully electric vehicle.
Benefit in Kind Explained
Benefit in Kind (BIK) tax for electric vehicles (EVs) is a tax incentive provided by governments to promote the adoption of environmentally friendly transportation. It is a tax on the non-cash benefits employees receive from their employers, such as the use of a company car.
The benefit of BIK tax for electric vehicles is that they enjoy lower tax rates compared to traditional petrol or diesel vehicles. This is because EVs have significantly lower carbon emissions, making them more environmentally friendly. As a result, individuals and businesses choosing electric vehicles as company cars can save a substantial amount on their tax liabilities.
The lower tax rates incentivise the adoption of electric vehicles, supporting the transition to sustainable transportation and helping to reduce air pollution and combat climate change. Additionally, driving an electric vehicle brings additional cost savings through reduced fuel expenses and potential grants or subsidies for purchasing or installing charging infrastructure.
Overall, BIK tax incentives for electric vehicles encourage greener transportation choices while providing financial benefits to individuals and businesses.
FREQUENTLY ASKED QUESTIONS
The advantages alone may not be the sole motivation for relinquishing a portion of your salary. Importantly, doing so can reduce your overall tax liability.
As a portion of your tax code represents your annual income, it will be adjusted when your salary decreases. However, the code will remain unchanged unless you transition from one income threshold to another with a second job that doesn’t contribute to any Personal Allowance.
The outcome hinges on the specific benefits you anticipate choosing in the future. Some benefits are contingent on the level of National Insurance contributions, which, under a salary sacrifice arrangement, would naturally be lower than those linked to your standard full wage.
Here are various instances of tax credits for which your eligibility might be reduced:
- State pension
- Statutory maternity pay
- Bereavement benefits
- Contribution-based Job Seeker’s Allowance (JSA)
The electric car salary sacrifice is a scheme that employers can integrate into their company structure. It enables employees to allocate a portion of their salary towards leasing a new electric vehicle. Rather than viewing it as a sacrifice, we prefer to consider it a benefits program, as both the employer and employees stand to gain significantly from it.
Due to the remarkably low Benefit-in-Kind tax rates established by the UK Government, all EVS are highly appealing in contrast to petrol and diesel vehicles. The extent of savings depends on the selected electric vehicle and the employee’s income tax bracket, but potential savings can range from 20% to 60%.
Certainly! The advantages of a salary sacrifice car scheme are manifold, benefiting both you as the employer, your employees, and, of course, the environment. This scheme is tailored to prioritise our people and the planet. If you’re interested in discovering how it can contribute to the success of your business, our friendly team is ready to provide guidance on the next steps.
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