Date posted: 30th Sep 2020
There is currently a zero P11d benefit for the drivers of electric cars in 2020/21. The legislation for this change is 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.
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 PEV range of only 45 miles.
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 set off 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.
Note however that 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 do so it’s a good time to buy a plug in hybrid.
Should you have any queries on the above or need further support, please contact our tax team here, who will be happy to assist.
Read more below:
Read more articles from our October 2020 tax news below:
- Still considering an electric company car?
- Errors in furlough claims
- Chancellor’s Winter Economy Plan
- Capital allowances – cliff edge approaching?
- Unlock funds within your company – make a R&D claim
- Retirement age and pension planning
- Get ready for leaving the EU on 1 January 2021