Electric vehicles, or EVs, are the consumer and fleet market’s future, especially as they become more affordable and accessible. The interest continues to grow as the government adopts incentives to steer businesses away from traditional diesel vehicles and toward a greener alternative.

The country’s Benefit-in-kind (BIK) tax is a CO2 emissions-based charge put in place to help reduce emissions through company fleets of any size, and for those drivers choosing EV’s, it can have a significant impact.

To help understand how BIK may impact your driver, we’ve asked some big questions.

What are the BIK benefits for electric vehicles?

The BIK tax rate is a direct reflection of the emissions your vehicles produce. For example, a diesel vehicle (which is not RDE2 Compliant) will receive a 4 percent annual BIK charge because of its higher emissions rate. In the case of electric vehicles, the vehicle has no emissions; as such, the government announced in 2019 that all-electric vehicles– or vehicles producing no emissions– purchased before 6 April 2020 would receive a zero percent BIK rate for next year.

There are some more details around BIK rates, focused on mileage and battery power, which can be calculated on the UK government’s site here.

So how does that change in 2021?

As we approach April 2021, the government has announced that this rate would increase 1 percent for the 2021/22 taxable year, and then another percent in the year after for all vehicles purchased after the 6 April 2020 cutoff. From there, tax rates for the 2023/24 and 2024/25 years would remain at the standard 2 percent increase from 2022/23.

Consider how this steady 2 percent increase could compare to the standard 4 percent BIK rate for diesel fleets. What kind of savings could that lead to for your drivers and your ability to retain and attract staff with a more eco aware policy?

How does this relate to the 2020/2021 budget?

The BIK tax is an added incentive to the government budget released in March 2020, in which zero- and low-emission vehicles receiving first-year allowances and VED exemptions. Electric vehicles are completely exempt from VED charges.

But what about hybrids?

While hybrid vehicles come with their own advantages for fleets– especially fleets worried about long drives and how that would impact a battery– they do not see the same perks as an all-electric vehicle. Hybrid vehicles would not be eligible for these BIK tax benefits. The government’s approach on hybrids had been to incentivize their use and take up, but this has since changed. However, hybrid vehicles see benefits in the budget in terms of first-year allowance discounts and discounted VEDs.

Where do I start?

We understand that switching on the electric fleet is a significant decision for you and your business, and we’re here to help. Schedule an EV consult to learn more.