The end is nigh for petrol and diesel cars and vans, so should you be considering electric vehicles for your business?
Range anxiety aside, there are financial benefits in choosing electric for your limited company right now. New company car tax rates mean it could be better for your finances to choose a fully electric vehicle. Remember, this doesn’t include plug-in or full hybrids. They will be no longer be offered for sale from 2035.
The government has introduced tax incentives in an attempt to sell more EVs as it focuses on its ‘net-zero’ efforts. Corporate fleets travel the most miles, so they say that targeting businesses helps make these emission goals more achievable.
The measures not only help your business and its employees financially, it will also reduce your environmental impact.
Whilst the government’s ‘plug-in grant’ has now been withdrawn, there are still advantages to buying EVs for your business. Here’s all you need to know.
1. Capital allowance
Buying a new fully electric car through your limited company means you can claim a first year allowance of 100% against your corporation tax bill. This capital allowance is only available for vehicles purchased outright or through a hire purchase agreement. If you lease under an agreement where the vehicle isn’t owned by the company, you cannot claim the allowance.
Cars do not usually qualify for 100% allowances as they are usually written down each year. So, buying an EV offers a great tax advantage at the moment.
The company will pay corporation tax on any proceeds from the sale of the vehicle in future. So, this is something to consider before buying electric vehicles.
When it comes to capital spending, businesses also qualify from a 130% super-deduction for installing charging points for electric vehicles. This is available until March 31, 2023.
2. Corporation tax and HP
Your business not only benefits from the 100% first year allowance, it will also make corporation tax savings on the interest on monthly payments.
As with ICE vehicles, VAT is not recoverable when purchasing a vehicle unless it is only available for use for business purposes. When leasing an EV, 50% of the VAT paid on the leasing charge can be recovered.
If an employee uses a company car for personal use,‘benefits-in-kind’ (BIK) arises. This is where a benefit (in this case the use of a car) isn’t included in an employee’s salary or wages, so is subject to tax.
The BIK rate for a full electric car is 2%, which offers significant savings on petrol and diesel cars that can attract a BIK of up to 37%. Benefits-in-kind are payable by both companies and/or employees.
- Companies: Pay list price of the car x 2% (the current BIK rate for EVs) x 13.8%, which is the National Insurance rate.
- Employees: Pay list price of the car x 2% x their income tax rate.
Installing charging points at an employee’s home address to provide a company car is not considered a benefit-in-kind.
The plug-in car grant has, as we have already mentioned, been withdrawn. According to the government, the money will be used to fund the installation of charging points.
There is, however, a workplace charging scheme grant which can be used to install charging points at a business address. This grant is discretionary and a voucher-based scheme that provides support for the up-front cost of chargepoints.
To apply, you must fill in a form here.
If you would like to know more about how electric vehicles can financially benefit your business, get in touch with our team today.