STILL CONSIDERING AN ELECTRIC COMPANY CAR?

There is currently a zero P11d benefit for the drivers of electric cars in 2020/21. The legislation for this change is included in Finance Act 2020 which also states that the benefit will be 1% of list price in 2021/22 and then 2% in 2022/23.

The zero taxable benefit also applies to hybrid cars emitting no more than 50 grams of CO2 per kilometre with a range using its electric motor of at least 130 miles, but only for cars first registered on or after 6 April 2020. Unfortunately, the range of most plug-in hybrids is considerably less than 130 miles. For example, the Mercedes A 250e costing £32,980 emits 26g CO2 but has a PEV range of only 45 miles.

An additional benefit for the business is that motor cars that emit no more than 50g CO2 per kilometre currently also qualify for a 100% first-year allowance which means that the full cost can potentially be set off against business profits.  The Mercedes A 250e would currently qualify for a 100% first-year allowance but the P11d benefit would be 6% for the employee in 2020/21.

However, the 50g CO2 threshold reduces to zero from April 2021 which means that hybrids will cease being eligible for the 100% write off. If the business can afford to do so it’s a good time to buy a plug-in hybrid.

ADVISORY FUEL RATE FOR COMPANY CARS

Below are the suggested reimbursement rates for employees’ private mileage using their company car from 1st September 2020. Where there has been a change the previous rate is shown in brackets.

 

Engine Size Petrol Diesel LPG
1400cc or less 10p 7p (6p)
1600cc or less 8p
1401c o 2000cc 12p 8p (9p)
1601 to 2000cc 10p (9p)
Over 2000cc 17p 12p 12p (11p)

 

You can continue to use the previous rates for up to 1 month from the date the new rates apply.  For wholly electric cars there is a 4p advisory rate. However, for hybrid cars use the equivalent petrol or diesel rate.

Where an employee is considering reimbursing their employer for private use to avoid a taxable benefit, it may be beneficial to compute the actual cost of private fuel rather than use the scale rate.