HMG and EV Income Tax Benefit in Kind

[Dustydog]

If my ICE was still a Co Car my benefit in kind taxation will be 37%.

Son tells me the Volvo Recharge is next to nothing 2% ish. So I’m closely following his financial impact of an EV as well as the practical.

Looking at HMG site the following is worth pasting for interest.

As more employers switch their fleets to electric vehicles, it’s worth knowing there are various other tax perks.

Firstly, there is no taxable benefit if the employer allows employees to charge their cars from a vehicle point at work.

Secondly, there’s no taxable benefit if an employer pays for a charging point to be installed at an employee’s home.

Thirdly, if an employer pays for charge cards for use at public charging points, these don’t count as a taxable benefit either.

So he charges at home every night and claims tax relief on the charging cost . Ok . But where at the moment , it's not clear , is how HMG differentiate private from business mileage. Many of you will remember the monthly mileage form we all filled in.
We will see. Anyone else know?

The problem I see on the horizon in a week or so will be the decline in ICE road fund licence income. Surely it has to be replaced somehow?Or will our roads become one big pothole😜

 

[RogerL]

For cars first registered from April 2025, EVs will be "taxed" the same as IC cars - so £10 in year 1 and then £190/year thereafter - note the over £40,000 surcharge of £410/year will also apply to those newly registered EVs.

2025 electric car tax explained - how much will I need to pay?

Electric car tax - also known as VED - will be charged on all EVs in the UK from April 2025. Parkers explains everything you need to know in this guide.

www.parkers.co.uk

 

[Buckman]

Looking at HMG site the following is worth pasting for interest.
The problem I see on the horizon in a week or so will be the decline in ICE road fund licence income. Surely it has to be replaced somehow?Or will our roads become one big pothole😜

That is what I have been saying for sometime.

 

[Jcloughie]

Any talk of company car tax relief is foreign to me. Never had to get involved. Any work travel was just paid at a milage rate, 45p/mile if I remember. We tried to negotiate a rise but the finance director convinced us that we would be worse off due to the tax rules.

I even bought my own cars!

We had pool cars in a previous job. We occasionally got pulled up by the police for no road tax. Explaining that Government vehicles are exempt was sometimes difficult.

My daughter is on top of such things, they have their own business and run a car and van, often updated. They have income and expenses channeled through different accounts, eg, American Express, to gain maximum Avios points. This enables a hell of lot of first class travel.

I am happy to remain ignorant on such things.


John

 

[Tobes]

If my ICE was still a Co Car my benefit in kind taxation will be 37%.

Son tells me the Volvo Recharge is next to nothing 2% ish. So I’m closely following his financial impact of an EV as well as the practical.

All true. The tax rate is fixed to April 2025 and then escalating 1% per year to 5% in 2028. Still good value.

Looking at HMG site the following is worth pasting for interest.

As more employers switch their fleets to electric vehicles, it’s worth knowing there are various other tax perks.

Firstly, there is no taxable benefit if the employer allows employees to charge their cars from a vehicle point at work.

Correct. Some employers do this for free, some for a reduced cost, there is no BIK.

Secondly, there’s no taxable benefit if an employer pays for a charging point to be installed at an employee’s home.

Also correct.

Thirdly, if an employer pays for charge cards for use at public charging points, these don’t count as a taxable benefit either.

This only applies to company cars, not to personal cars, but it's not just for charge cards. Any public charging the the company chooses to pay for on behalf of the employee is not subject to BIK.

If the car is a personal EV, charging that is payed for by the company is subject to BIK at marginal rate. (This is the same as it was for a personal ICE vehicle). For any business miles driven on that charging, tax relief on the BIK can be claimed at 45p per mile for the first 10k business miles.

So he charges at home every night and claims tax relief on the charging cost . Ok . But where at the moment , it's not clear , is how HMG differentiate private from business mileage. Many of you will remember the monthly mileage form we all filled in.
We will see. Anyone else know?

If it's a company car, HMRC are not interested in the difference between private and business miles. The company may be, but that is a different story.

The problem I see on the horizon in a week or so will be the decline in ICE road fund licence income. Surely it has to be replaced somehow?Or will our roads become one big pothole😜

Road fund licence is not a thing. Vehicle excise duty (VED) (what people tend to call road fund licence) is being retroactivly re-instated for EVs registered after March 2017 at the standard rate of 190 per year from 2025.

I.e. from 2025, all cars that are older than 2017 pay the same rate of VED in year 2 onwards. Year 1 price is governed by CO2 emissions. The Luxury car tax will also be common to EVs registered after March 2025.

But this is a relatively small additional cost. The real issue is how the government will fill in the gap created by lack of fuel duty and the VAT on that duty.

 

[Dustydog]

If it's a company car, HMRC are not interested in the difference between private and business miles. The company may be, but that is a different story.

How times change.
Back in the day nearly all of us gave up,the free fuel card which covered private use. The tax was exorbitant. You needed to do 12k private miles a year just to break even!

 

[Tobes]

How times change.
Back in the day nearly all of us gave up,the free fuel card which covered private use. The tax was exorbitant. You needed to do 12k private miles a year just to break even!

Yep - that's part of why I gave up a company car in 2006. To be clear, that charge is still in place today for "fuel" (petrol, diesel, LPG). Electricity is not a fuel in the eyes of HMRC for company or personal cars. That means if you have a generous employer, an EV is even more beneficial than an ICE as a company car for private miles. To be clear, the EV charging costs, cost my employer about £240 a year. With my PHEV, I had the benefit of private fuel payments too, and it cost them more like £1000 for less mileage, and cost me £400 in BIK.

 

[GaryB]

I also got off the company car bandwagon back in 2019 and never looked back, officially home based so charge 45ppm and get a decent car allowance in my salary. Company cars aren’t the perk they once were…..

 

[RogerL]

I also got off the company car bandwagon back in 2019 and never looked back, officially home based so charge 45ppm and get a decent car allowance in my salary. Company cars aren’t the perk they once were…..

I recall that a fully-expensed company car was only lightly taxed in the '80s - although a jealous fellow employee did suggest that the company shouldn't pay for my fuel towing down to Cornwall and up to Scotland - fortunately not followed up by the directors.

Despite driving like a hooligan I was able to get similar fuel consumption as the other managers with similar cars - and I suspect we were all fuelling our wives' cars at the company expense!

 

[Tobes]

I also got off the company car bandwagon back in 2019 and never looked back, officially home based so charge 45ppm and get a decent car allowance in my salary. Company cars aren’t the perk they once were…..

It's true they were not for 15 years. Then in 2018, if your company let you have an EV, they became a bargain again. 2018 to 2021 company car tax on an EV was 0% and 1% in 2021 to 2022. It's currently 2%.
My brand new car (in 2021) is costing me the equivalent of a coffee a week over the 4 years compared to the car I owned and was running before - and that was before the government rethought BIK on home charging (so it got cheaper). Of course, I will need to rework the calculations in 2025 when I have to return it and choose a new path, but given whatever I have will be another EV (there is no way I am going back to ICE) it will probably still be the lowest cost way for me to have one.

 

[Buckman]

But this is a relatively small additional cost. The real issue is how the government will fill in the gap created by lack of fuel duty and the VAT on that duty.

The govt lose out on duty and VAT on fuel, however in addition there is also the billions lost on VAT for servicing cars, motor spares and a host of other things associated with motoring and that could also include things associated with caravans.

 

[GaryB]

It's true they were not for 15 years. Then in 2018, if your company let you have an EV, they became a bargain again. 2018 to 2021 company car tax on an EV was 0% and 1% in 2021 to 2022. It's currently 2%.
My brand new car (in 2021) is costing me the equivalent of a coffee a week over the 4 years compared to the car I owned and was running before - and that was before the government rethought BIK on home charging (so it got cheaper). Of course, I will need to rework the calculations in 2025 when I have to return it and choose a new path, but given whatever I have will be another EV (there is no way I am going back to ICE) it will probably still be the lowest cost way for me to have one.

Definitely, the company I now work for provide EV Skoda's to those taking a company car, I chose not to and negotiated a decent allowance into my salary instead so I can use my own car. Previously I had company cars from 1998 and grew oblivious to how much I was actually paying in BIK. I took redundancy in 2019 and gave back my 2016 BMW 520D and only then did I look at what I'd been paying in BIK and it was around £430 a month!!!!! As you say, nowadays an EV is pretty much the only way to avoid getting stung by tax, my company also allow company car drivers to charge at work for free which is a real bonus for some.

 

[otherclive]

The govt lose out on duty and VAT on fuel, however in addition there is also the billions lost on VAT for servicing cars, motor spares and a host of other things associated with motoring and that could also include things associated with caravans.

The Government have been loosing out on VED for many years given their encouragement of more economical cars taxed at £0 or £30, plus being more economical they use less fuel and so tax takings in fuel duty and vat have reduced too. Yet they still use the roads.

Government have been asleep on watch and probably didn’t want to take action fearing loss of popularity.

 

[Buckman]

The Government have been loosing out on VED for many years given their encouragement of more economical cars taxed at £0 or £30, plus being more economical they use less fuel and so tax takings in fuel duty and vat have reduced too. Yet they still use the roads.

Government have been asleep on watch and probably didn’t want to take action fearing loss of popularity.

Another thing I found out is that on many new cars one cannot retro fit a tow bar unless it is done by the car manufacturer at time of assembly.

People are buying a new vehicle which is very capable to towing their caravan, but not ordering a tow bar at the same time. They then find out that only the dealer may be able to retrofit towbar & the electrics.

Same applies to buying a newish car second hand. Something to do with the software in cars not being accessible to third parties to prevent hacks etc.

 

[GaryB]

Another thing I found out is that on many new cars one cannot retro fit a tow bar unless it is done by the car manufacturer at time of assembly.

People are buying a new vehicle which is very capable to towing their caravan, but not ordering a tow bar at the same time. They then find out that only the dealer may be able to retrofit towbar & the electrics.

Same applies to buying a newish car second hand. Something to do with the software in cars not being accessible to third parties to prevent hacks etc.

That was me posting that yesterday on another forum, while the fitting etc of the tow bar is fine, the manufacturers (VAG in my case) are refusing to let anyone (even VAG dealers!) access the software to "code" the car to allow it to use the trailer assist software. It's disappointing but is something that VAG put in place late last year and could be followed by others. Even my Audi dealer doesn't know why VAG are taking this approach, it's frustrating to say the least.

 

[Buckman]

That was me posting that yesterday on another forum, while the fitting etc of the tow bar is fine, the manufacturers (VAG in my case) are refusing to let anyone (even VAG dealers!) access the software to "code" the car to allow it to use the trailer assist software. It's disappointing but is something that VAG put in place late last year and could be followed by others. Even my Audi dealer doesn't know why VAG are taking this approach, it's frustrating to say the least.

What have you done to get around the electrical connection for the caravan?

 

[otherclive]

I read that one owner with a pre owned Tiguan had Park Assist and a rear view camera. But trailer assist wasn’t compatible with the OEM camera. So he had to obtain a different camera and then follow a complex recoding procedure. They clearly don’t make it easy for owners/buyers of cars not fitted with Trailer Assist at works.

Anyway going off thread now. Warrants a new thread given potential interest.

 

[GaryB]

What have you done to get around the electrical connection for the caravan?

It all works as it should (lights/fridge etc) but the in-built Audi trailer assist, parking sensor delete, fog light delete etc cannot be done. It's the same with other 2024 onwards VAG cars. Plug & play 13 pin wiring harnesses still do the basic needs, it's the car-based software trailer stuff that cannot be done.

Audi come with "trailer prep" listed as a no-cost option that is actually included as standard, while it sounds nice & fancy the only bit of the trailer prep that's of any use to anyone with a non-factory tow bar is the cut-out underneath the bumper for the tow bar itself!

 

[RogerL]

That was me posting that yesterday on another forum, while the fitting etc of the tow bar is fine, the manufacturers (VAG in my case) are refusing to let anyone (even VAG dealers!) access the software to "code" the car to allow it to use the trailer assist software. It's disappointing but is something that VAG put in place late last year and could be followed by others. Even my Audi dealer doesn't know why VAG are taking this approach, it's frustrating to say the least.

That sounds like protection of the trailer assist feature - I'm not aware of protection issues in the basic towing module used by VW, Audi, etc when factory-fit towbars are specified.

 

[GaryB]

That sounds like protection of the trailer assist feature - I'm not aware of protection issues in the basic towing module used by VW, Audi, etc when factory-fit towbars are specified.

My experiences with this were yesterday, Tow Bar Express discussed it with me, I then rang my Audi dealer in Nottingham who confirmed it pretty much chapter & verse, there's similar stories on another forum confirming it and also a mention that Toyota were likely to follow a similar path. Allegedly it's down to EU anti-ECU tampering rules or suchlike. Either way, if a main dealer can't do it there's not much the average public punter can do. I just have to remember to disable the rear parking sensors when reversing with the caravan or trailer to prevent the car slamming it's brakes on as it'll think I'm about to reverse into something.

 

[Dustydog]

The Government have been loosing out on VED for many years given their encouragement of more economical cars taxed at £0 or £30, plus being more economical they use less fuel and so tax takings in fuel duty and vat have reduced too. Yet they still use the roads.

Government have been asleep on watch and probably didn’t want to take action fearing loss of popularity.

It seems HMG figures tell a different story Clive. Apologies now if I have misread them

Latest figures show that in 2022/23, VED generated around £7.3 billion (up from 7.1 billion in the previous financial year and the highest amount ever raised) and Fuel Duty about £25.1 billion.
The 23/24 are not available to me but maybe you have them and they are down? Plus what may artificially affect the numbers is the first few years ICEs pay a much higher VED??
Just wait until the end of the month and the VED will,probably go sky high🙀

 

[otherclive]

It seems HMG figures tell a different story Clive. Apologies now if I have misread them

Latest figures show that in 2022/23, VED generated around £7.3 billion (up from 7.1 billion in the previous financial year and the highest amount ever raised) and Fuel Duty about £25.1 billion.
The 23/24 are not available to me but maybe you have them and they are down? Plus what may artificially affect the numbers is the first few years ICEs pay a much higher VED??
Just wait until the end of the month and the VED will, probably go sky high🙀

Whilst vehicle numbers have increased and the nett figures of VED and fuel duty may have risen how much more would have been raised had the £0, £30 VED and fuel duty relatively unchanged since 2010 and a5p reduction that lined the retailers pockets been raised. The figures you quote include recent adjustments to those duties, plus the effects of higher fuel prices post Ukraine, but exclude how much more could have been raised had action been taken earlier. Wasn’t the £0 and £20 /30 VED first introduced in 2001, and even when the first significant changes were made un April 2017 whole swathes of prior registered cars had VED unchanged. I feel that a potentially useful source of government income has not kept pace with government expenditure needs. The potential beneficiaries such as school, libraries, swimming pools etc and hospital buildings having lost out.

 

[Tobes]

Definitely, the company I now work for provide EV Skoda's to those taking a company car, I chose not to and negotiated a decent allowance into my salary instead so I can use my own car. Previously I had company cars from 1998 and grew oblivious to how much I was actually paying in BIK. I took redundancy in 2019 and gave back my 2016 BMW 520D and only then did I look at what I'd been paying in BIK and it was around £430 a month!!!!! As you say, nowadays an EV is pretty much the only way to avoid getting stung by tax, my company also allow company car drivers to charge at work for free which is a real bonus for some.

It sneaks up on you...
For a real world comparison, my 2021 Polestar 2 Launch edition AWD + Tow bar, leather, bling alloys was £18 a month in 2021 and £36 in 2022. Including all charging...

 

[Dustydog]

Whilst vehicle numbers have increased and the nett figures of VED and fuel duty may have risen how much more would have been raised had the £0, £30 VED and fuel duty relatively unchanged since 2010 and a5p reduction that lined the retailers pockets raised. The figures you quote include recent adjustments to those duties, plus the effects of higher fuel prices post Ukraine, but exclude how much more could have been raised had action been taken earlier. Wasn’t the £0 and £20 /30 VED first introduced in 2001, and even when the first significant changes were made un April 2017 whole swathes of prior registered cars had VED unchanged. I feel that a potentially useful source of government income has not kept pace with government expenditure needs. The potential beneficiaries such as school, libraries, swimming pools etc and hospital buildings having lost out.

Oh dear 😥You know who will know this . I expect a massive hike in our VED. Not something the average motorist will welcome.

 

[otherclive]

Oh dear 😥You know who will know this . I expect a massive hike in our VED. Not something the average motorist will welcome.

The "average" motorist has been getting it on the cheap for years, but I don't expect a massive hike. Look to the future though with the IEA's latest report that fossil fuel usage will soon peak, yet developments for extraction continue apace, and there will be a fall in fuel and LNG prices as producers fight for a reducing market share. What joy! 🤞