Electric Vehicle Benefit-in-Kind Tax Rises Ahead

Electric company cars have benefited from exceptionally low benefit-in-kind tax rates—just two per cent in recent tax years—making them a highly attractive option for employees and a powerful recruitment and retention tool for employers. However, Treasury plans will see BIK rates for pure battery-electric vehicles rise incrementally from April, climbing to three per cent, then four and five per cent in subsequent years. While still far below petrol and diesel equivalents, the increases will affect drivers' net pay and may alter the financial case for some vehicle choices.

For fleet managers and HR teams, the message is clear: communicate the changes early and run the numbers for every driver considering a new company car. Even at five per cent BIK, an electric vehicle remains significantly cheaper to tax than a petrol or diesel equivalent, but employees accustomed to near-zero tax bills may perceive any increase as a penalty. Providing clear, personalised illustrations of monthly cost—and comparing them to the petrol or diesel alternative—will help maintain engagement with your EV programme and avoid unwelcome surprises at payroll.

Salary-sacrifice schemes, which allow employees to lease an electric car from gross salary, remain highly tax-efficient and will continue to deliver substantial savings even as BIK rates edge up. Employers should review whether salary sacrifice is available to all eligible staff and ensure the scheme is promoted effectively. For grey-fleet users—employees using their own cars for business mileage—switching to a sacrificed EV can still deliver a step-change in take-home pay and carbon footprint, provided the right support and communication are in place.

Bluepoppy Solutions helps employers and employees navigate company car and salary-sacrifice choices, providing clear cost comparisons, BIK modelling and access to a wide range of electric vehicles through our multi-funder panel. Our Fleet Cost Review includes a full analysis of tax changes and their impact on your people and your budget. Speak to our Bristol team to keep your EV programme on track as the tax landscape evolves.

Bluepoppy view: BIK rates are rising for EVs, but they still beat petrol and diesel—communicate early and keep the momentum.

Source: FMJ — summarised and written from a Bluepoppy perspective. We don’t reproduce the original article.