TT333: Still considering an electric company car?

October 27, 2020

There is currently a zero P11D benefit for the drivers of electric cars in 2020/21. The legislation for this change was 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. To date we are not aware whether HMRC will change these rates and increase them as we move forward.

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 plug-in electric vehicle range of only 45 miles.

Notably, as the range of the electric cars decreases, the value of the benefit stands to increase.  Taking petrol hybrids as an example, a car with a range of 70 – 129 miles will have a benefit of 3% of the list price, whereas a car with a range of <30miles will have a benefit of 12% of the list price.

For diesel hybrids, there is a 4% surcharge on the above figures.

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 offset 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.

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, it may be a good time to buy a plug- in hybrid?

To discuss the above further and to see how planning for a new vehicle could work for you, please do not hesitate to reach out to your contact at Barnes Roffe for further advice and support.


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