The future of salary sacrifice and benefit-in-kind tax
The Chancellor of the Exchequer, Jeremy Hunt presented his Autumn Statement to Parliament today (Thursday 17 November 2022). We’ve summarised these changes below and how they may affect The Electric Car Scheme.
The Company Car Tax (aka BIK rate)
“Company car tax rates will remain lower for electric vehicles and I have listened to industry bodies and will limit tax rate increases to 1% a year for three years from 2025.” said Jeremy Hunt.
In 2025, the Company Car Tax also known as the Benefit-in-Kind tax will increase by 1%, from 2% to 3%, and increase by 1% every year thereafter up to 5% by 2028. To date, we have anticipated this to change to 5% from 2025 onwards, and calculated your tax savings based on this assumption (to ensure you wouldn’t get caught out).
So, for any customers with car leases going into 2025 and beyond, you will now save even more! For example, if you lease a new electric car priced at £40,000 (new), and is on the 40% tax rate, they will now save £320 more if they have the car for that full year - great news!
Electric car owners to pay road tax from 2025
Electric car owners will have to pay vehicle excise duty (VED), better known as road tax, from 2025, the chancellor has announced.
Rates of road tax vary largely according to emissions and the age of the car, with all zero-emission vehicles currently exempt. Electric cars will be charged the lowest band for new cars in the first year – currently £10 – and will then pay the same rate as other vehicles.
Thereafter electric cars will pay £165 per annum - so if you are on a 4 year lease already on the road, they will have a potential cost of £165 in 2025 - but they can pay for this using their gross salary via The Electric Car Scheme. This will offset some of the BIK savings - but overall you are still very likely to save more than expected previously!
Higher rate tax band changes
The chancellor also announced the 45% higher rate of tax will now be payable from £125,140 as opposed to the current £150,000. Whilst this may result in less cash in bank accounts, it does mean that those who are now on the top rate of income tax can save even more with The Electric Car Scheme.
You can get an accurate quote for your chosen car, lease and level of income using our handy tax saving calculator on our website here.
How do these changes affect The Electric Car Scheme?
Overall, this is excellent news for any employer offering The Electric Car Scheme! It means our employee benefit will continue to provide you with the most affordable way to lease an electric car beyond 2025, all the way through to at least 2028.
In addition, our online salary sacrifice calculator will be updated to reflect these announced changes. You can calculate your savings here.
If you have any questions about the announcement, please email our team on info@electriccarscheme.com and we’ll happily answer your questions.
