As well as the well known environmental benefits, there are also lots of electric car tax benefits. From government grants to benefit in kind allowances, there are reasons to lease or buy an electric car via the company and make it available for private use to an employee/director.
In this blog, we will go through the grants available and the benefit in kind implications of buying an electric car through your business.
One of the key electric car tax benefits is a very low benefit in kind (BiK) rate. This makes it a highly tax-efficient option for individuals and means that in real terms buying or leasing an electric car will have a minimal impact on an individual’s tax liability.
If your company leases or buys an electric car for any employee the benefit in kind consequences (so the figure YOU would pay tax on personally) would be as follows:
The benefit-in-kind is based on the current rates chargeable and is calculated using the tax List Price of the vehicle ( i.e. the list price when new). At the following percentages (for an electric car with zero C02 emissions):
- Current Year ending 5th April 2022 1%
- Year ending 5th April 2023 2%
Rates for electric/Hybrid cars with C02 emissions of more than 50 Co2 emissions depend on two factors; electric range and CO2 emissions. We have put together a table which includes the rates for hybrids and all other types of cars. You can find it here.
Additionally, there is no fuel benefit charge at all for electric employer-provided cars. Even better, there is no benefit-in-kind charge for employees charging their own cars at a workplace charging station – even where there is private use of the car.
The UK Government has set a target for ceasing all production of petrol and diesel vehicles by 2030. This is part of the so-called “green industrial revolution” which aims to tackle climate change. The Government is therefore incentivising electric vehicles (EVs) to encourage the British public to purchase EVs.
Plug-In Car or Olev Grant
If you’re planning on buying a new electric car you can get up to £2,500 off the purchase price via the Plug-in Car Grant. This grant applies to cars with CO² emission levels of less than 50g/km that are able to travel at least 70 miles with zero emissions.
The Government grant is automatically deducted from the price of the car at source by the dealer and is available for qualifying electric cars that meet certain criteria. Eligible vehicles must cost less than £35,000 and the grant is available for up to 35% off the purchase price* (maximum of £2,500). The size of the grant you will receive depends upon the make, model and specs of the EV. Different levels of grants are also available for trucks, mopeds, motorbikes and small or large vans.
You can find a list of eligible cars here.
Home Charging Grant
In addition to the Plug-in Car Grant, the Government also offers the Electric Vehicle Homecharge Scheme.
The Electric Vehicle Homecharge Scheme (EVHS) grant provides a 75% contribution to the cost of one charge point and its installation. The grant cap is set at £350 (including VAT) per installation.
Requirements for the grant are:
- A person owns, leases, or has ordered a qualifying vehicle.
- Has dedicated off-street parking at their property.
A person may apply for 2 charge points at the same property if they have 2 qualifying vehicles. You can find out more about the EVHS here.
Other Electric Car Tax Benefits
There are some clear benefits to purchasing or leasing an electric car. The low Benefit-In-Kind rate and the Government Grants for purchase and installation being the main ones.
However, there are other benefits too.
You are still able to claim your business mileage even though you are not using petrol. You can do this using the government-approved mileage allowance for an electric vehicle. The rate per mile will vary depending on whether the car is owned by the company or by an employee.
A Smart & Environmentally Friendly Option
When you take into consideration the benefit-in-kind rate, government grants available and mileage allowance; purchasing or leasing an electric vehicle is an attractive option for any business owner or director who is looking to upgrade to a new company vehicle.
If you would like to find out more about the implications of purchasing an electric vehicle for your business don’t hesitate to get in touch.