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Going electric: the changing face of company cars

The UK’s best-selling car for three months in 2020 did not even have an engine.  

The top-selling car in the UK for the months of April, May and December last year was a Tesla Model 3, a car that currently costs just over £43,000. One major reason for Tesla’s popularity is tax. For 2020/21, the employee who chose a zero-emission company car like the electric Tesla paid no company car tax. A BMW 3 series of the same value would have cost a higher rate taxpayer up to £5,200 in tax.

The company car scales have been revised for the tax year 2021/22, but the Tesla is still only taxable on 1% of its value – meaning a bill of about £175 for a higher rate taxpayer. The tax on the BMW is increasing by the same amount.

The tax benefits of going electric extend to fuelling the car, too. There is no tax to pay for electric car charging at the workplace. If the employer fuelled the BMW 3 series, then in 2020/21 the higher rate taxpayer would have up to an additional £2,940 tax to pay – and would probably have been advised to pay for their own petrol.

If you are due to change your company car soon, be sure to consider the electric option.

The Financial Conduct Authority does not regulate tax (or motoring) advice, and levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.