Saving the environment while saving money? it can be done!
Ultra-low emission cars can help the environment – and they can help you save. Under new rules coming into effect in 2017, a large number of salary sacrifice arrangements will be losing their pre-tax financial benefits, but ultra-low emission (ULE) cars will continue to offer savings in the form of reduced PAYE tax and National Insurance payments.
If you're offering company cars as a salary sacrifice benefit to your employees, they will currently be making car payments before tax and NI is deducted from their wages, meaning they get more for their money, while the tax man gets a little bit less. Your organisation, too, will be benefitting from a reduced NI bill. This will change for any new schemes in April of this year, with payments on cars (as well as gym memberships, mobile phones, holidays, train tickets, and most other benefits – minus a few exceptions) coming after tax and NI is deducted – unless they're ULE cars.
Why are ultra-low emission cars exempt from salary sacrifice changes?
It’s not been expressly stated why ULE cars have been spared the salary sacrifice cuts, although other related decisions have been more obvious. The main two benefits to keep their tax and NI-reducing perks are pensions and childcare – two things that would surely cause outrage if affected.
The issue of ULE cars is more likely a financial one. The government has recently used £500m of funding to support uptake of ULE cars and vehicles in the UK, and is clearly keen to keep encouraging their use to avoid that money going to waste!
The fourth and final benefit exempt to the new rules is cycle to work schemes – which does add some further context to the government’s decision on ULE cars. Both cycling to work and lower car emissions contribute massively to reducing carbon footprints – so although the government haven’t really come out and said it, these exemptions are a big win for the environment.
What is an ultra-low emission car?
Ultra-low emission vehicles are defined as either:
- Vehicles with pure electric engines
- Vehicles with plug-in hybrid engines
- Vehicles with CO2 emissions of less than 75g per kilometre
Whatever their definition, these vehicles must also be capable of at least ten miles of zero-emission driving.
The number of ultra-low emission vehicles (ULEVs) on the roads is growing – according to government statistics, as of the end of 2016, 1.2% of all new vehicle registrations were ULEVs.
It may not sound like much now, but from July to September 2016, 11,000 ULEVs were registered in the UK – a 47% increase compared to the same period in 2015. They’re not an odd little niche of the motoring world – they’re slowly becoming a better and better offering, with the infrastructure improving to match.
What are the benefits of ultra-low emission cars?
Well, obviously, as we’ve discussed, ULE cars and vehicles are exempt from changes to salary sacrifice rules, meaning that if you provide company cars under a salary sacrifice arrangement, ULE cars will now provide both you and your employees with a better deal than non-ULE cars.
If your choice of ULE vehicle is a plug-in model, then it may qualify for an additional grant for the government. Provided it meets certain criteria, you could receive as much as £4,500 towards the cost of a car, or £8,000 of the cost of a van.
Fuel costs are also far lower for electric and plug-in hybrid models – potentially as low as 2p or 3p per mile – and ULEVs of all kinds are currently exempt from the London congestion charge. Depending on how much your organisation contributes toward your employees’ use of their company cars for work purposes, this could see massive savings across a whole fleet of vehicles – and the personal savings for each driver will be substantial also.
There are also obvious benefits to your organisation’s carbon footprint – by limiting emissions to less than 75g per km, compared to the average of 122g per km, you’re reducing carbon emissions by an average of 39%.
What ultra-low emission models are available?
There’s more than you might think! The most popular models, according to government stats, are currently:
The Mitsubishi Outlander
Available in a Diesel model, which certainly isn’t classed as an ULE car, the Outlander is available as a plug-in hybrid. The asking price is around £7,000 more for the hybrid model, but Mitsubishi estimate that you’ll save £10,000 in running costs over three years – which, combined with any potential grant, makes it a nice little earner.
The Outlander proves that electric vehicles don’t have to be tiny city cars – they can be SUVs with plenty of power too. Take a closer look at the Outlander.
The Mercedes C350e
The C350e is the plug-in hybrid addition to Mercedes’ popular C-class range, designed for efficiency and practicality. Available in a saloon and estate format, it promises 134.5 miles to the gallon, and is powered by both a silent 60kw electric motor and a two-litre, four-cylinder petrol engine. Find out more about the C-class.
The Nissan Leaf
The most popular fully electric car on the market, the Leaf (short for leading environmentally-friendly affordable family car) has quickly come to set the standard, doing for electric cars what the Prius did for the hybrid.
No emissions, no petrol station prices, and about 150 miles from a single charge – all while qualifying for the full government grant amount. Sound good? Learn more about the Leaf.
But these are far from your only options. There’s the aforementioned Toyota Prius, ULE versions of the VW Golf and Passat, and ULE models entering the standard ranges of most manufacturers – all the way up to the BMW i8.