EVs – how employers can help Craig Harman, a tax specialist and partner at Perrys Chartered Accountants, answers your questions about the electric vehicle salary sacrifice scheme What is the electric vehicle salary sacrifice scheme? Much like schemes for pension contributions, childcare and charitable giving, the electric vehicle salary sacrifice scheme allows employees to pay for an electric car each month using their gross salary. This means the payment comes out before deductions are made for tax and other contributions. An electric vehicle will be taxed according to the value of the benefit itself – known as a benefit in kind (BIK). This is the value of the benefit you receive i.e. the car. For batteryoperated electric vehicles, the tax is 1% for 2021/2022 and 2% for 2022/2023. This makes it an incredibly low-cost way to own an electric vehicle. How does the electric vehicle salary sacrifice work? In order to benefit from the electric vehicle salary sacrifice scheme, your employer will need to agree to set up, or already have in place, a scheme and run it through their payroll. As an employee, you won’t own the vehicle yourself, but will instead lease it through your employer as a company car. You will then use your gross income to finance the vehicle. Your Income Tax will be based on your remaining salary and the BIK value. There are other benefits too. Because you are leasing the vehicle through your employer you won’t need to pay a deposit or undergo any credit checks; your payments will include insurance, servicing and maintenance, breakdown cover and accident management; and electric vehicles are exempt from road tax. What sort of savings can be made on an electric vehicle salary sacrifice scheme? By leasing a vehicle in this way, you can save up to 50% on the monthly cost of owning a vehicle. This saving is generated through reductions in National Insurance and Income Tax payments, as well as associated savings like maintenance and insurance. Additionally, because the employer is responsible for leasing the vehicle under salary sacrifice, they will pay the VAT on the vehicle instead of you. Employers can then reclaim 10% of this VAT back from the government. Employers will also save on reduced employer National Insurance payments, which will be lower due to the salary sacrifice the employee is making. The more employees there are taking part, the more these savings will increase. For more information about salary sacrifice, visit https://www.gov.uk/ guidance/salary-sacrifice-and-theeffects-on-paye. www.perrysaccountants.co.uk 01732 759725 33 magazine EV Cecilia Routledge, Global Director, Energy & Facilities for CTEK, said: “It is extremely encouraging to see that the availability of public and destination charging facilities is starting to step up to meet the growing demand for out-of-home charging, as this is a vital factor in the overall acceptance and take up of electric motoring. “However, reliability of out-ofhome charging remains an issue, and this is an aspect that needs additional focus, along with steps to reduce the complexity of payment and industrywide commitment to rolling out EV roaming, which would give EV drivers better access to charging stations in the same way that mobile phone users can simply access different networks as they travel around the globe.” Not suprisingly, financial considerations are becoming increasingly important for EV owners. One quarter (25%) specify lower running costs as their favourite thing about EV ownership, compared to 21% who choose the environmental benefits. For others, the main attractions are not having to visit petrol stations (12%), an appreciation of EV technology per se (11%) and fringe benefits’ such as free parking and reduced congestion charges (8%). Despite these preferences, UK EV owners remain the most environmentally conscious in Europe, with 33% giving concern for the environment as the main reason for purchasing an EV, compared with an average of 23% in the rest of Europe, where lower running costs are the main reason for purchase. For non-EV owners, the purchase price of EVs remains the biggest impediment to switching. Almost two thirds (64%) of all UK drivers (the highest level in Europe), feel that Government subsidies are essential to encourage more people to buy EVs. The survey also highlights a need for clear, consistent information about EVs and EV charging: 30% of drivers say they are confused by all the information available on EVs; 45% don’t know where to go to find out about EVs; and 17% of drivers say that knowing more about EVs and how they work would encourage them to purchase one. The full report, with findings on electric vehicle take up and ownership across Europe (UK, Sweden, Germany, the Netherlands and Norway) is available at www.ctek.com/uk/surveyelectric-vehicle-ownership-and-take-upin-europe. Craig Harman, Perrys Chartered Accountants
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