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  • Jul 21, 2022

  • 4 min read


5 reasons to keep company car tax low

The UK has made the commitment to reach a net zero by 2050. Transport makes up around 30% of the UK’s carbon emissions, so making the switch to electric driving has never been more urgent.

One of the ways the government are incentivising drivers to make the switch is through low company car tax, also known as Benefit-in-Kind (BiK) for EVs, which is just 2% until 2025. Compare this with against 15 - 37% tax for petrol cars, depending on their carbon emissions. This low company car tax rate, along with salary sacrifice schemes like ours, make the tax saving available on EVs appealing to a wide range of drivers.

We supported the BVRLA’s company car campaign to keep these rates low and call on the UK Government to continue supporting the vital car tax regime for EVs.

The great news is that the government listened to the voices in the EV industry, and electric car drivers were given clarity on the costs to drive an EV for the foreseeable future in the Autumn Statement.

The headlines are; Benefit in Kind rates remain low for electric car drivers, road tax will only come into force for EVs after 2025, and a decrease in the higher rate tax threshold means there are more savings to be made for high earners through EV salary sacrifice.

Here are five reasons why company car tax should stay low.

1. Low company car tax is a key driver of EV take up

The foresight in BiK rate that we’ve enjoyed over the past few years has played a crucial role in the growth of the EV market. It’s helped drivers make all important tax savings, but also given them certainty that they’ll be able to enjoy those savings for years to come. A jump in the BiK rate could cause drivers to second guess making the switch and lead to a stall in EV take up.

2. Low company car tax helps drivers to make the switch sooner than they could otherwise

Offering tax savings on brand new cars via salary sacrifice helps make driving electric more affordable for all. Especially lower earners who otherwise may not be able to afford an EV upfront. Accessing an EV via your employer also means you don’t need to pass an individual credit check, as the business is credit checked rather than the driver.

3. More new EVs on the road now means more second hand (and affordable) EVs will be available in years to come

To continue to make EVs more affordable for the masses in the future as second hand models, we need to keep growing the amount of EVs on the road now. How do we do that? Keep incentivising people to switch. Simple.

Plus, the used market is 3 x the size of the new car market. The company and salary sacrifice car markets will be a key supplier of affordable, used BEVs.

4. More demand for EVs will create more jobs in the sector

Despite the decline in traditional manufacturing employment because of more automation, the shift towards electrification will ultimately create more jobs, mostly along the transport value chain. An AIE 2018 study showed growth in electromobility would create a net balance of 170,000 jobs in 2030.

5. A sudden increase in BiK could have far reaching impacts

If the company car tax rate were to be increased suddenly, it would undoubtedly slow the transition to electric driving. It could reduce tax revenues in the longer term as fewer company cars will be taken. Plus it could slow the decarbonisation of transport as people hold on to older and more polluting vehicles instead switching an EV through a company scheme such as salary sacrifice.

What can you do to help? Keep up to date with the campaign on the BVRLA website.