Cars: Incentives for Electric, Increases for Diesel

The company car benefit is calculated by applying an emissions based percentage to the cash equivalent (list price plus enhancements) of a vehicle which is then subject to Class 1A National Insurance for the employer and income tax for the employee.

This percentage differs for petrol and diesel cars as diesel cars are subject to an additional 3% above petrol cars regardless of emissions, up to a maximum of 37%.

From April 2018, there is to be a change to the supplement for diesel cars, which will see this rising from 3% to 4%, resulting in higher tax and National Insurance costs being incurred by both the employers and employees where a diesel car is used.

The good news, however, is that the basis for preparing the benefit in kind with regards to diesel vans and commercial vehicles will not be changing in line with this supplemental increase.

Employer provided electric car charging ports for electric or hybrid cars will be exempt from being taxed as a benefit in kind from April 2018.

The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.

Written by Danny Henville ACCA

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