A third of UK companies who intend to review their company car programme in the next 12 months plan to introduce more environmentally friendly vehicles into the schemes.
The latest Company Car Benefits Survey Report, by global advisory, broking and solutions company Willis Towers Watson (WTW), stated that the incentive for more sustainable vehicles is likely influenced by the more favourable tax band regime on low CO2 vehicles and the immediate tax write-down that can be claimed against electric vehicles.
The tax advantages of salary sacrifice schemes – one of the most cost-effective ways of acquiring an electric vehicle – are considerable because the rate of company car tax payable by employees on EVs is 2% in the current tax year and rises only to 5% by 2028. For more polluting vehicles such as some diesels the rates are as high as 37%.
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Employees on such schemes also pay benefit in kind (BiK) tax on benefits they get from their employer on top of their salary. HMRC treats the benefit separately from staff’s salary, which means they pay the tax before it arrives in employees’ bank accounts. Any driver who uses a company car for personal use pays BiK tax out of their monthly wage.
Many companies are looking to introduce more environmentally friendly policies and behaviours while keeping in line with best market practices and reducing costs, stated the WTW report.
Almost half (49%) of organisations have introduced a ceiling on CO2 emissions, and 67% allow sales professionals and managers to select an electric or hybrid vehicle as part of their schemes.
Other measures taken include paying for electricity if the employee charges their electric vehicle at home (44%), financing the installation of a charging point at an employee’s home (38%), paying for electricity if an employee charges their car while on the road (57%) and supplying specific car charging points on-site at the workplace (64%).
A commitment to environmental sustainability is also reflected in benefit offerings that encourage eco-friendly behaviours among employees. About a fifth (19%) of UK organisations offer cars as a benefit under a salary sacrifice agreement, while 63% offer a bikes-for-work scheme according to WTW’s 2024 Benefits Design Practices report.
Lori Stokes, rewards data intelligence lead at WTW, said: “Many companies are aligning with more environmentally friendly behaviours and coupled with government tax relief schemes that help keep down costs, the shift towards electric, hybrid and low emission vehicles is a greener step towards achieving multiple company objectives.”
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WTW surveyed 1,610 UK organisations across a broad range of industries about their company car benefit policies and practices between April 2023 and January 2024.
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