If you are a director considering buying a fully electric car it can be tax efficient to purchase it through your company.
With the high cost of fuel at the moment, many drivers are reviewing their options and a fully electric or hybrid car is being considered by many.
To encourage the use of fully electric cars (electric range of 130 miles plus) the government has introduced low benefit in kind tax rates and the rate for 2022/23 and 2023/24 is 2%. The rate is applied to the list price of the vehicle. The benefit for a car with a list price of £35,000 will therefore be £700 which will be subject to tax (on you personally) and Class 1A National Insurance Contributions (on the company).
The low benefit in kind charge also applies to hybrid vehicles with emissions from 1-50g per km and range of more than 130 miles.
As electricity is not a fuel there is currently no fuel benefit charge on electric cars and thus no Class 1A NIC payable by the company thereon.
Vehicle Excise Duty
The vehicle excise duty rates for all fully electric vehicles are nil until at least 2025.
Additional Tax Benefits
You can lease the car, but buying it is advantageous.
Buying a company car isn’t an option for every business owner and a lease is a better option to manage cashflow. However, there are tax advantages of buying a car outright in the form of capital allowances.
A first year capital allowance of 100% is available, providing the car is purchased new and unused. This means tax relief for the full cost of the car can be obtained in the accounting year the car is purchased.
A first year capital allowance of 100% of expenditure is also currently available for electric charging point equipment.
Switching to an electric company car currently offers substantial tax benefits and has the added benefit of reducing your emissions. You do however, need to consider whether it is a practical option for you. If you intend to use the vehicle for short trips to and from work then it is probably a viable option, but if you regularly do long trips then you will need to give greater consideration to the purchase. This will also be the case if you live in the middle of nowhere and are too far away from a charging point. You can use this handy map to find out where your nearest charging points are.
If you are considering purchasing an electric car and want to discuss the benefits in more detail do get in touch.