Switching to electric vehicles: Navigating the pros and cons

The trend towards electric vehicles is accelerating, with over 1 million fully electric cars registered in the UK by February 2024, alongside thousands of electric vans and plug-in hybrids. As the government plans to ban the sale of new petrol and diesel cars by 2035, businesses and employees are increasingly opting for zero-emission electric models

CREDIT: This is an edited version of an article that originally appeared on SME Today

Advantages of EV company cars

• Tax benefits: Electric company cars offer substantial tax savings for both businesses and employees through emission-based tax benefits, with fixed tax rates for all electric vehicles.
• VAT savings: Employers can recover VAT for employees who charge vehicles at work or public charge points, leading to additional savings.
• Purchase price discounts: Salary sacrifice schemes often provide employees with potential discounts on the purchase price compared to buying the car outright.
• Congestion charge exemption: Electric company car drivers are exempt from congestion charges and Clean Air Zone charges, offering additional cost savings.

Disadvantages of EV company cars

• Lower take-home salary: Participation in salary sacrifice schemes can lead to reduced take-home salary and lower workplace pension contributions, impacting financial stability.
• Mortgage and loan challenges: A decrease in take-home salary may affect an employee’s ability to secure mortgages or loans due to altered income and expenses.
• Limited vehicle selection: Employees participating in salary sacrifice schemes may have limited options for electric vehicle models, potentially restricting choice.
• Penalties for early scheme exit: Exiting salary sacrifice schemes prematurely may result in penalties or fees, limiting flexibility for employees.

While electric company car schemes offer tax savings, discounts, and emission-free benefits, they also come with considerations such as reduced take-home salary, limited vehicle choices, and penalties for early exits. Businesses and employees must carefully weigh the pros and cons before transitioning to electric vehicles.