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Sustainability

Electric cars: seeing sense

Jon Hanson, director at the Future Mobility Group, explores why electric cars simply make sense for businesses, employees and the environment.

While rates are increasing, they remain noteworthy for both employees and businesses. For the former especially, it means they save money when taking an EV as a company car.

Let’s take an example from an employee perspective. David is a 40% taxpayer and drives a diesel car with a list price of £37,835 and a BiK rate of 31% (tax year 2021/22). If he switched to an equivalent EV with a BiK rate of 1% (tax year 2021/22, increasing to 2% in tax year 2022/23 and expected to remain at 2% for tax year 2023/24), he would save on average around £4,500 a year in tax. That’s equivalent to a pay increase of about £375 per month, by simply switching to an EV.

But what about for business? Can there be savings there, too? Let’s look at how changes in BiK rates drive savings for business with another example: Easy Print (UK) operates a sales team (40% taxpayers) with a fleet of 20 diesel cars, each costing £37,835, with a 31% BiK rate (tax year 2021/22). By switching to an equivalent EV, Easy Print (UK) could save over £31,000 a year in Class 1A national insurance (tax year 2021/22).

For many businesses, making the switch to EVs means taking into account all costs associated with a vehicle, not simply the capital or lease cost.

So it’s clear from these examples that there are some real cost benefits to businesses adopting EVs, before factoring in other savings such as fuel or access to Clean Air Zones (CAZ) – the first of which was introduced in Bath in March 2021, to be followed by a Birmingham CAZ in June. EVs are around 60% cheaper to ‘fuel’ than a petrol car, and access to London’s own CAZ, the Ultra Low Emission Zone, costs £12.50 per vehicle a day, on top of a congestion charge of £15 a day – both of which EVs are exempt from. These savings can really add up and further support the case for EVs.

For many businesses, making the switch to EVs means taking into account all costs associated with a vehicle, not simply the capital or lease cost. Doing this means looking at vehicles differently, such as enabling employee access to company cars through salary sacrifice options, or basing fleet decisions on more accurate vehicle whole life costs.

But it’s important to note that not all costs are financial.

With transport being the largest contributor to CO2 in the UK, businesses have a role to play in meeting sustainability and clean air targets.

This demand is being felt by corporates all the way to SMEs, with pressure to be transparent about their business’s climate impact and what they are doing to support the sustainability agenda. But whatever the size of the business, employees, too, are increasingly driven by purpose, creating additional pressure for business to adapt.

EV adoption is one way to lower emissions, and demonstrate to both employees and customers alike how a business is contributing to sustainability. In turn, this will help drive employee motivation and retention, as well as brand benefits – all of which will ultimately lead to enhanced engagement with a business, boosting increased revenue and returns.

The time is now

The transition to EV is happening. With the government announcement that new petrol and diesel cars sales will be banned from 2030, EV registrations increased by 185% in 2020 (compared to 2019), amid a surge in new EV launches. This growth has continued into 2021.

But to support widespread adoption, there are currently incentives in addition to tax benefits* – such as electric car grants of up to £2,500 towards an EV costing less than £35,000, as well as a Workplace Charging Scheme where businesses could receive a grant of up to £14,000 to install EV charging ports. However, it’s not clear how long these schemes will continue to run.

Acting now ensures businesses receive the full financial support available in the form of tax and grants, as well as differentiating themselves to employees and customers. This means maximising some of the brand and loyalty benefits of adoption, before it becomes the norm.

* Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances.

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