Electric Vehicles and BIK Tax: An Overview
The popularity of electric vehicles (EVs) has been rising dramatically over the past few years. With the global shift toward renewable energy and the need to reduce carbon emissions, many countries are incentivizing the adoption of EVs. In the United Kingdom (UK), one such incentive is the Benefit in Kind (BIK) tax for company cars. This article provides an overview of EVs and BIK tax in the UK.
Electric Vehicles: The Future of Transportation
An electric vehicle uses an electric motor and a rechargeable battery pack to power it. Unlike conventional gasoline or diesel-powered vehicles, EVs do not produce any direct emissions. They are also quieter, smoother and require less maintenance, making them an attractive option for consumers.
EVs come in different types, including Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs) and Range-Extended Electric Vehicles (REEVs). BEVs rely solely on electrical power, while PHEVs and REEVs use both electrical power and gasoline/diesel fuel.
According to the Society of Motor Manufacturers and Traders (SMMT), electric vehicle registrations in the UK have increased significantly in the past few years. In 2019, over 37,000 electric vehicles were registered in the UK, up from just over 3,500 in 2013. While EVs still only make up a small percentage of new car registrations, their popularity and market share are expected to continue to rise.
Benefit in Kind (BIK) Tax: What is it?
The Benefit in Kind (BIK) tax is a tax paid by employees who receive benefits other than their salary. In the case of company cars, the employee pays tax on the benefit of having the car as part of their earnings. The amount of BIK tax paid is determined by the car\’s list price, CO2 emissions and fuel type. The tax rate is a percentage of the car’s list price, and the employee pays tax on this amount annually.
For electric vehicles, there are significant BIK tax incentives for company car drivers in the UK. In the 2020/21 tax year, the BIK tax rate is 0% for pure electric cars. This means that an employee who drives an electric company car pays no BIK tax on that vehicle. For comparison, the BIK tax rate for a gasoline or diesel vehicle with CO2 emissions of 111-115g/km is 27% in the 2020/21 tax year.
The BIK tax rate for electric vehicles will gradually increase in the coming years. From April 2021, the rate increased to 1% for pure electric cars, and it increased to 2% in 2022 and 2023. However, even with these increases, the BIK tax rate for EVs will still be significantly lower than for petrol or diesel vehicles where BIK tax ranges from 22% to 37%.
In addition to the BIK tax, other incentives are available to encourage EV adoption, such as reduced vehicle tax rates, grants for the purchase and installation of charging equipment, and exemptions from certain charges and fees.
The number of EV’s on the road in Liverpool and Manchester has increased dramatically over the past few years and with the 2030 ban on the sale of new petrol and diesel engine cars it shows no sign of slowing.
Electric vehicles are gaining popularity globally, and the UK is no exception. With the increasing shift towards renewable energy and the need to reduce carbon emissions, incentives to encourage EV adoption, such as the BIK tax, are crucial. The 0% BIK tax rate for pure electric cars has proven to be a strong motivator for company car drivers to switch to EVs. While the tax rate for EVs will increase in the coming years, it will still be significantly lower than for conventional vehicles. The BIK tax is just one of the many incentives available for EV adoption in the UK, and it is hoped that they will lead to the reduction of carbon emissions and a cleaner environment for future generations.
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