Electric cars will help you reduce your environmental impact, ongoing costs, and save you tax. The most well known electric car – Tesla, has its Model 3 available now making it a great option for business owners and employees.
- Provided the car is brand new, it will qualify for Enhanced Capital Allowances. A first-year allowance which allows the company to deduct the full cost from profits before tax. This is in addition to the normal Annual Investment Allowance
- If you are registered for VAT, you can potentially reclaim 50% of the VAT on lease payments. You can claim 100% if the car is for 100% business use only and not available for personal use. If you buy the car, you can claim 100% VAT only if it’s not available for personal use at all
- If you install a charging point at work, currently this qualifies for the first-year allowance
Leasing – two ways to do this
- If the company will own the car at the end of the lease, as the Co2 is under the threshold of 50g/km, 100% Capital Allowance is due
- If the company will not own the car, as the Co2 is under the threshold of 110g/km, then you can deduct the full monthly cost from the company profits
- No London Congestion Charge
- No Road Tax
- No Fuel Benefit to pay if 100% electric
- The cost of fuel is also considerably lower, as the car plugs into the many free chargers dotted around the country. Alternatively, you can recharge by plugging in at home
For the Employee
- If the car is an ultra-low emission vehicle (<75g/km) it can be provided to the employee using a salary sacrifice scheme. The money is taken from the employee’s salary before tax and National Insurance is worked out. This will mean a lower National Insurance bill for both the employer and employee
- For the employee, there is a ‘discount’ as less National Insurance is paid on the salary
- The Benefit in Kind is 16% for 2019/20 and will reduce significantly in 2020/21, in some case going down to 0%. This is applied to the list price of the car
- The Benefit in Kind tax for hybrid vehicles will depend on the cars zero-emission mileage
- There isn’t any taxable benefit for the employee if they charge their electric car at work
- The employee can reclaim the electricity at 4p per mile for company cars when charging at home or at a public charging point only. The public charging point usually provides a receipt on the amount
So, how much tax would you save?
How much tax you’ll save would vary depending on your personal circumstances, but hopefully the above has provided a good starting point. If you’d like us to work out exactly how much tax you’d save if you purchased or leased an electric car, please get in touch. We will be able to provide you with:
- Car calculations based on hire purchase, finance lease, and operating lease so you can make a decision on what the best option is for you
- Any corporation tax and VAT implications
- Any personal implications and what the taxable benefit is
- Any national insurance implications for the company
- Linking any calculations with your current salary and dividends
Have some questions?
If you have any questions or would like to calculate how much tax you could save, you should chat to Fantasia. She can provide you with car calculations based on different options and your personal circumstances, so you can decide on what is best for you. Please click here to find a time that works to chat with her.