Tax change that can save drivers thousands sees soaring interest in EVs
The number of electric cars being leased in the UK has almost doubled since the introduction of new tax rules which significantly reduce the cost of EVs.
Specialists EV leasing firm Octopus Electric Vehicles has reported a 91 per cent jump in customers since changes in April dropped the benefit in kind (BIK) tax on zero-emissions vehicles to nothing.
The move cut the BIK rate from 16 per cent to zero per cent and combined with salary sacrifice schemes can save drivers as much as 40 per cent - equivalent to £2,500 a year - on their leasing costs.
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BIKis a tax levied against items such as company cars which offer you benefits beyond your salary. Normally company car drivers who use their work car for personal use have to pay a percentage of their salary in tax, based on the value and emissions of the car.
Salary sacrifice schemes let company car drivers pay for their vehicle out of their gross salary, which reduces their income tax and National Insurance payments. The zero BIK rate means they also don’t pay any tax against the value of their car which, Octopus estimates, saves the average driver between 30 and 40 per cent on monthly leasing payments.
For those earning between £100,000 and £120,000 the savings can rise to up to 60 per cent - equivalent to an average of £3,711 per year.
BIK tax for EVs will increase to one per cent in April 2021, and two per cent in 2022, but still remains significantly lower than the average 27 per cent BIK tax for combustion cars.
“The Impact of the last six months has been staggering,” says Fiona Howarth, CEO of Octopus Electric Vehicles. “Changes to Benefit in Kind tax have been a financial game-changer for EV leasing. Add this to brilliant electric cars hitting the market and huge savings on running costs versus petrol cars, and EV’s are a total no brainer. It’s no wonder then that we are seeing a huge boom, with the number of companies ordering EVs via our salary sacrifice scheme growing five-fold since April.”
EV registrations in September were 165 per cent higher than at the start of the year as alternative fuelled vehicles continued to buck the trend of falling registrations
Poppy Welch, Head of Go Ultra Low, the joint government and industry campaign promoting electric vehicles, says: “There has never been a better time to drive electric. Zero per cent Benefit in Kind is just the latest in a host of benefits available to EV drivers. Not only does it complement the £3,000 Government plug-in car grant, the £350 Government home charging scheme, the exemption from Vehicle Excise Duty and London Congestion Charge, but it’s also enhanced by significant fuel, tax and maintenance savings.”