Electric cars are increasing in popularity, accounting for 11% of all new cars sold in the UK in 2021. Growing environmental concerns and financial incentives are combining to make ‘driving green’ tempting for many company car drivers. Of course, the running costs per mile are hugely lower than diesel and petrol options. Are you aware of the other savings you can enjoy?
Five ways that electric cars make business sense
1. Electric Car Grant
The Electric Vehicle Grant is a subsidy on new zero-emissions vehicles. It aims to bring the price of electric cars closer to the cost of buying a petrol or diesel alternative. This year, you can claim up to £1,500 of the cost of a new electric vehicle with a maximum purchase price of £32,000.
2. Lower Benefit-in-Kind Payments
If you drive a company car for private use, you will have to pay a Benefit-in-Kind (BIK) contribution, or company car tax, via your Income Tax payments. (Also known as Company Car Tax.) Every car has a BIK percentage banding. The more expensive the car is and the higher the CO2 footprint of the car, the higher the Income Tax charge will be. For many company car drivers, electric vehicles – plug-ins or self-charging hybrid vehicles – are a tax efficient consideration.
The lowest BIK charge is 1% rising to 2% in April 2022 (although this may change as part of any budget). This applies only to fully electric cars and hybrid cars that can travel at least 131 miles on a single electric charge. The benefit gradually increases in stages to 13% for a car whose range on a single charge is less than 30 miles.
3. Vehicle Tax Exemption
Good news – electric cars are exempt from vehicle tax.
4. Congestion Charge Exemption
More good news – electric vehicles are exempt from congestion charges too! The daily charge is currently £15. If you’re driving in and out of cities regularly, your saving adds up quickly.
5. Tax Relief on Capital Allowances
If your car has CO2 emissions of less than 50g/km, you can deduct up to full capital allowance cost from your pre-tax profits in the first year. So – if you buy an electric car for £40,000 this could amount to tax relief of £7,600 in the first year.
“With the price of electric cars becoming more affordable and a tempting range of financial and environmental benefits available, electric company cars are a realistic option for many businesses,” says Emily Bridges of re:accounts in Stevenage. “With new charge points being added daily, the UK’s charging point infrastructure is continually changing, helping business owners choose the green driving option.”
Would you like to know how buying and running an electric car will affect your business financially?
Talk to the friendly experts at re-accounts. We are not car experts, but we know a huge amount about tax and how to reduce your liability.
