With the UK Government’s ambitious plans to accomplish net zero emissions by 2050, the general public and businesses must play their part.
Tax incentives to encourage people to make a change have been introduced and with our brand-new electric charging point at the office, electric vehicles are a great place to start.
Last month saw Germany surpass 1,000,000 electric vehicles on their roads. If you include hybrid models, the UK have just over half of that meaning we certainly need to hit the accelerator in comparison.
Why buy an electric car?
There are many benefits of buying an electric vehicle and with investment from government in Research and Development, we imagine the benefits are only going to get greater with more options on the market.
If you have been in fully electric or hybrid vehicle you will have noticed the unusually low noise levels that are produced.
Not only does an electric vehicle avoid producing harmful gasses, but noise pollution is reduced too.
Charging up your car at home, or whilst in the office, is another huge benefit, avoiding those inconvenient petrol station stops (and that bar of chocolate that seems to leave with you!).
Finally, possibly the biggest benefit, and the reason we wanted to write this blog today are the cost savings.
Not only is there no road tax to pay but electric vehicles have a cheaper running cost and as a business owner, the tax differences of having an electric company car compared to an petrol or diesel are vast.
Tax on an electric company car.
When using an asset that belongs to the company, it is called a benefit in kind. This is a ‘perk’ that an employee of the business gets that is not included in their salary.
In the situation of a car, you will have to pay this tax if using the vehicle for personal reasons, including travelling to and from home.
The amount of tax paid on a company vehicle depends on the CO2 rating.
This year, fully electric vehicles will only pay 1% which will rise to 2% for the tax year 2022/23.
As an example, an electric car costing say £100,000 would give you a benefit of only £1,000 per year, which means a tax cost of £400 as a 40% taxpayer.
In comparison, if this were a petrol or diesel car costing the same this could set the taxpayer back an additional £7000.
For plug-in hybrid cars that emit 1g to 50g of CO2/km there are different rates depending on emissions.
This benefits those who need vehicles that can drive the further but still choose a greener option.
In addition, those looking to purchase electric vans. There is now a zero-van benefit charge for employees who drive fully electric vans and use them privately.
Be careful though as not all “vans” qualify as vans and HMRC are looking more closely now to ensure that what is being claimed to be a van is actually a van under the legislation. Contact us to help as a mistake can cost a significant amount of money should HMRC investigate.
Capital Allowances
The good news continues. If the car is electric (or new and unused with CO2 emissions lower than 50g/km), you can claim a first-year allowance, which means full corporation tax relief in the year of purchase.
This means you can deduct the full cost of the vehicle from your profits before tax. For cars bought after April 2018, you can claim enhanced capital allowances, which are a type of first-year allowance for certain vehicles.
There is a lot to be considered when looking for a new car, but with the tax savings to be had on electric vehicles, they might just be moving into poll position.
If you would like some help planning for a new car, we can help. Call us on 01482 888820