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Electric Car Tax – What’s In Store For 2021-23?

3 June 2021 BlogBusiness

The UK government offers incentives in the form of electric car tax cuts, grants and exemptions for businesses and employees. Here's what you need to know.

With new UK Clean Air Zone charges coming into effect this year, and mounting societal pressure, it’s now a question of ‘when’ and not ‘if’ your business should make the switch to electric vehicles (EVs).

The government is currently offering many incentives in the form of electric car tax cuts, grants and exemptions for businesses and employees. We’ve summarised the latest information you should be aware of below.

Pure EVsPlug-in Hybrid Vehicles
Year 1 of ownership£0£0-140 (depending on vehicle’s CO2 emissions)
Annual charge£0£140

Changes introduced in April 2020 also mean that new and existing electric cars with a list price of over £40,000 are exempt from the 5 year ‘Premium rate’ tax. Owners will see a saving of around £1650 – previously having had to pay £325 annually for years 2-6 of ownership.

Electric car BIK rates

Traditionally, employers have been able to offer company cars as an added benefit when attracting new employees. But uptake has been dwindling in recent years thanks to rising benefit-in-kind (BIK) tax rates – the tax an employee must pay for receiving this benefit, based on a vehicle’s fuel type, CO2 emissions and personal income tax percentage.

However, the government’s April 2020 tax update may spark change over the coming months and years, with some generous tax incentives laid out for any business adding electric powered vehicles to their company fleet. The electric car tax for benefit-in-kind for pure-Evs has increased to 1% in April 2021 – 2022 and then 2% from April 2022 – 2023. Lower emission vehicles (up to 50g/km, 130+ mile range) registered before 6 April 2020 will have a frozen BIK rate of 2% until April 2023.

Tax YearPure EVsLower emission vehicles (1-50g/km emissions, 130+ mile range and registered after 6 April 2020)Lower emission vehicles (1-50g/km emissions, 130+ mile range, registered before 6 April 2020)
2020
2021
0%0%2%
2021
2022
1%1%2%
2022
2023
2%2%2%
2023 & BeyondRates under review (will be announced this year)Rates under review (will be announced this year)
ModelJaguar i-PaceBMW 5 Series Saloon
PoweredElectric (av UK mix) – 0cc (0 litre)
EV400 S 90kWh 400PS Auto
Petrol – 2998cc (3 litre)
540i xDrive M Sport
Sport-Auto
P11D£60,940£52,740
CO2 Level0g/km165 g/km
6 April 2021 – 5 April 2022
BIK Rate1%37%
BIK Value£609£19,514
[email protected]%£122£3,903
[email protected]%£244£7,806
[email protected]%£274£8,781
6 April 2022 – 5 April 2023
BIK Rate2%37%
BIK Value£1218.8£19,514
[email protected]%£243.76£3,903
[email protected]%£487.52£7,806
[email protected]%£548.46£8,781
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