Buying an electric or hybrid car is fast becoming a popular decision amongst business owners, with many reaping the benefits through their limited companies. The “go green” movement is being heavily pushed by the government, who have been looking to encourage business owners to look for greener options when it comes to company cars.
When purchasing a company car, it’s important to weigh out the benefits and the drawbacks of either a petrol, diesel or electric vehicle. What we have found, however, is that the advantages of owning an electric vehicle far outweigh those of a petrol or diesel car:
The Benefits Of Electric Cars
- Company car users will only pay 1% of the list price as a benefit in kind on their P11D, this will increase to 2% in 2022/23. As an example, if a business owner buys a Tesla Model S with a list price of £85,000, the tax bill will be £340 for a higher rate taxpayer.
- Vehicles with no CO2 emissions, such as electric vehicles, are eligible for 100% First Year Allowance, provided that the car is brand new. Taking the same example as above, if the car was purchased outright, or through hire purchase, the whole cost can be offset against your company’s profits attributable to corporation tax. That’s a whole £85,000 against your company’s taxable profits.
- If you are registered for VAT, there is potential of being able to claim 50% of the VAT on lease payments. You can only claim 100% if the car is fully used for business, and not available for personal use.
- If a charging point is installed at your place of work, this can also qualify for First Year Allowances.
Business owners are now coming to the conclusion that although electric vehicles are an expensive one-off cost, in the long run, it’s not likely to be as costly in comparison to other vehicles.