Is it time to switch your company cars to electric?
Want to know why more and more companies are moving to zero emission electric fleets? There are tons of very reliable, good-looking and environmentally friendly EVs for business drivers to choose from and the selection keeps getting better every year. So businesses are more likely than ever to find the right EVs for their needs.
That's not to mention the obvious benefits for the planet. EVs are highly energy efficient and have zero tailpipe emissions. The government's Road to Zero report says overall that battery operated cars have greenhouse emissions that are 66% lower than a petrol car and 60% lower than a diesel one. Electricity grid emissions will also fall by 2050, with greenhouse gas emissions from EVs falling as well.
We know electric vehicles are better for the planet. But what organisations rarely realise is that switching to an EV fleet is super practical and can save them a lot of money, too.
Why use zero emission vehicles in your business?
Moving your company’s fleet to electric is a simple and very effective way of showing the organisation’s environmental stance to both customers and employees. It shows how serious you are about reducing your carbon footprint and moving towards net zero carbon emissions.
Switching to EVs also shows people that your business is forward-thinking. The ban on sales of new petrol and diesel cars in the UK might be close, but it doesn’t come into effect until 2030. Making the switch now proves your company is ahead of the curve and that you’re putting your money where your mouth is.
And talking of money, there are loads of other financial reasons why switching to an electric vehicle fleet now makes perfect sense. EVs can cost up to 80% less to run than the combustion engine models they’ll replace. And those aren’t the only savings.
What are the tax benefits of electric vehicles for companies?
We already told you that switching to an EV fleet can save you a lot of money. Now, let’s tackle some of your questions on how those savings work:
Can my company reclaim VAT on an electric car?
The rules here depend on how much you and your team are using them for work and for pleasure. If your brand new EV is used for business and personal roadtrips, you can still reclaim 50% of the VAT part of the business contract hire cost.
If you are wondering about lease payments, we’re here to help you out. Your monthly payments can be set against profits for any new EV that has emissions of 50g/km or below. This can save your company up to 19% on tax. For cars that are above the 50g/km, you can still claim 85% of your monthly payments.
But there’s more! You can also pay less National Insurance if you run an EV salary sacrifice scheme. The employee will give up part of their pay to get a new EV, which means they’ll have a lower gross salary. That doesn’t just mean they pay less Income Tax, it also means both of you will pay less National Insurance.
Employees do have to pay Benefit In Kind (BiK) - or company car tax - on cars driven through a salary sacrifice car scheme. But drivers of EVs pay a fraction of the BiK tax that drivers of petrol or diesel cars do. Until 2025 at least, EVs will pay a BiK rate of just 2%. That compares with between 22 - 40% for petrol or diesel cars.
It’s worth noting the BiK rate is currently fixed until April 2025 at 2%, after this time it could increase.
What about road tax?
EV drivers don’t pay any road tax. Don’t forget that EVs are also compliant with clean air standards, which is great since more than 50 UK towns and cities are looking to make exhaust-emitting vehicles pay extra emissions-related charges. EV drivers don’t pay any congestion charge in central London either! Ka-ching!
How good is the EV charging infrastructure?
You understand the savings, now let’s move onto charging. No one wants to get stuck in the middle of nowhere because they didn’t have time for a full charge. Don’t worry, the charging infrastructure is improving all the time. At the end of May 2022 there were 32,312 public charging points across the UK. That was an increase of 32% compared with May 2021.
EV drivers can also use the Octopus Electric Universe charging network. Electric Universe makes public charging simple. Rather than using lots of different cards and apps for different public charging providers, with usage spread across different emails, texts and bills, Electric Universe brings it all together. One card and app, thousands of chargers, all in one place. And all with zero added costs or ongoing fees.
For companies, there’s the government-funded Workplace Charging Scheme too. This is an allowance for employers who want to install EV charge points. The grant covers up to 75% of the total cost to buy and install chargers. It’s capped at £350 per socket with a max 40 sockets per business. That’s a lot of EVs.
What should companies consider when switching to electric vehicles?
As well as being kinder to the environment, an electric fleet means big savings in running costs for your company, too. Depending on the electricity tariff you are using, you can save even more money.
Maintenance costs are also cheaper for EVs compared with traditional petrol cars. EVs have fewer moving parts, there’s no dirty and expensive oil to change. Brakes often last longer too because of regenerative braking that uses the electric motor to slow the car. All this adds up to huge savings for running an EV fleet compared with a car fleet of petrol or diesel cars.
With business contract hire, you’ll agree to a yearly mileage when you decide on the lease. If you go over this you’ll probably have to pay an excess mileage fee. These can vary but are usually a few pence per mile over the agreed number.
So, switching a company car fleet to electric really does make sense on many levels.