Car Allowances versus Electric Company Cars. Huge savings!

Are you a 40% tax payer with a car allowance?

Some quick maths I did on 16 February 2022 for a contact who wanted to understand more about whether a car allowance or company electric car was better. So I thought a wider audience may well find this interesting. Figures are based on a leading personal lease website and AA for fuel costs.

(Caveat - I’m not a tax advisor or an accountant so this is just my personal view! Please do your own maths / speak to a financial expert). Hopefully having rolled out the largest pure electric fleet in the UK I do have some knowledge and credibility in this space however.

Car Allowance

£8k car allowance at 40% tax leaves £4,800 p.a. which is £400 per month

A BMW 320d SE Pro on 48 month lease and 10k miles p.a. Including maintenance is £545 per month plus £4,905 upfront, so £647 per month over 48 months

Insurance approx £40 per month

Fuel at 60 mpg (claimed by BMW but likely not in real world) would be 166 gallons for 10k miles or 755 litres which at £1.49 per litre is £1,125 per year or £94 per month

Therefore total cost of £781 per month

Which leaves you £381 nett out of pocket per month. At 40% tax rate you have to earn £635 per month to take home £381 or £7,620 per year. (For interest 320d OTR price is £38,700 with 0-60 in 6.8 secs)

Electric Company Car

On a Tesla Model 3 as a company car you would pay 2% Benefit in Kind for tax year 2022/23 (fixed for next 3 years).

Clearly lots of other EVs available which may be better suited to you than a Tesla but Tesla Model 3 v BMW320d is my go to simple comparison. 

The OTR price is £42,990 therefore annual tax cost is 2% * 40% * 42,990 = £344 p.a. Or £29 per month.

Electricity is around 5p per mile (although can be as low as 1.5p per mile if you have a smart meter and charge overnight on something like Octopus Go). So fuel is £500 a year.

Therefore total cost to you is £844 (insurance covered by company if company car), or £1,406 gross. 

Benefits

Therefore you end up with an effective £6,213 pay rise or £3,728 p.a. more take home and a Tesla Model 3 rather than a BMW - saving the plant, your pocket and keeping people (your children especially!) happy.

There will be significant emissions redeuctions (especially if you use a 100% renewable energy tariff) and clean air benefits as well.

(For interest Tesla Model 3 is £42,990 OTR with 0-60 in 5.8 seconds and WLTP range of 305 miles)

For the Employer

The cost to the company would be less as well (rather than them paying you £8k per annum the annual lease cost including upfront payment is £7,389) and basically no NI to pay. They would have to pay insurance but overall cost will be flat if not a saving and clearly they could choose cars other than Tesla which would likely save them money

Any company not running 100% electric company cars is costing themselves and their employees money.

Clearly there is also an option to run a salary sacrifice scheme instead if they don’t want the hassle of a company car fleet.

Moving to EVs could also be a way of increasing total package value without a cost to the company and increasing engagement.

Summary

Remember you don’t have to care about sustainability, you only have to care about it if you love your children and grandchildren!

Keep KISSing Sustainability. Simon xx