New company car tax rates could offer savings of up to 95%

New company car tax rates on zero-emission vehicles, effective from April 2020, are expected to offer savings in the region of 95% for employees, according to new analysis from Deloitte. The projected cost reductions are largely due to the significant tax incentive of the incoming 0% company car tax rate on zero emission vehicles; down from 16% currently.

In addition, the new rates will have a positive effect for businesses, where the total cost of ownership for EVs will be cheaper than some petrol or diesel equivalents. For companies themselves, switching the profile of a 900-strong diesel or petrol fleet to electric could create savings in excess of £1.9m annually.

A higher rate taxpayer (40%), receiving a diesel hatchback company car with a list price of £30,000, can currently expect to pay just over £18,000 in tax and fuel costs over a 48-month period. By comparison, for a comparable electric vehicle, the total cost of ownership reduces to £916; a saving of 95%.

Michael Woodward, UK automotive lead at Deloitte, commented: “We’ve seen electric vehicle (EV) popularity increase fourfold over the past year alone. For those thinking about making the switch, the tax changes for company cars from 6 April 2020 are certainly a strong incentive. With a surge in demand likely, the question remains whether both manufacturers and businesses are ready.

“Over the next three years, car manufacturers will need to review the scale of their production to accommodate growth and assess supply levels into the UK. Fleet sales will drive the majority of demand and manufacturers will be keen to prevent missing out on sales due to lack of supply.

“For many businesses, there are operational, employee and environmental benefits in transitioning to EVs. However, the suitability of electric must make sense before making the switch. For some, EVs will already be a viable option given their fleet journey patterns, and next steps may simply be building a robust policy and plan to support wider EV adoption. For others, long-distance travel demands or knowing how and where to charge EVs will need more consideration. Businesses upgrading from diesel or petrol fleets may also require investment for on-site charge points.

“Environmentally, transport is the highest carbon emitting sector in the UK and targeting corporate fleets in this way has the potential to displace the maximum amount of fossil-driven miles. Many businesses are already signed up to the Climate Group’s ev100 initiative and April’s tax changes offer an opportunity to achieve the commitments it sets out, whilst also meeting individual targets in reducing carbon emissions.”

Deloitte predicts 21 million more electric vehicles on the road worldwide by 2030. In the UK, Deloitte estimates that 28,000 public charging points will be required by 2030.

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