Electric cars are everywhere at the moment. These environmentally friendly vehicles are starting to really make an impact on reducing our negative environmental impact on the world.
And as of 2030, there will be a ban on sales of new petrol and diesel cars. Making the already popular electric alternative even more present.
So if you’re thinking of purchasing an electric car as your new mode of transport and want to know the ins and outs of how it affects you financially then today we have you covered.
But what does it mean for you personally or for your business?
As of April 6th 2020, businesses that utilise electric cars (as a company car) can claim 100% of the cost against the profits of the year it was purchased. Additionally, there are no restrictions to the cost of the car.
For businesses that regularly utilise company cars for conferences or meetings then purchasing an electric vehicle might be a good move.
Electric cars generally have lower running costs; although it’s always best to take a look over the differing electric vehicle manufacturers and see what is best for you.
In 2021/2022 there was an increase on Benefit in Kind (BIK) tax of 1% which, since April 6th 2022 has increased to 2%. (This percentage will be capped till 2025.) You can read more about that here… Tax benefits of owning an electric car.
Buying outright through your business
If your business buys an electric car there are tax breaks available on the purchase of the vehicle. You will get 100% capital allowances on the purchase of the car in your end of year tax return.
For example; if your business has £100,000 of taxable profit – you would normally pay £19,000 of corporation tax.
However, if you buy a new electric car for £80,000 (whether you have paid for it fully or financed it) the capital allowance reduces your taxable profit from £100,000 to £20,000. This means that you will only pay corporation tax on the lower amount of £20,000.
A saving of £15,200 based on these example figures.
However, not all businesses have the means to buy or finance an electric car outright. This means that leasing might be a better option.
Leasing an electric car
If you feel that buying upfront may not be the best option for you then perhaps leasing will be.
When you lease an electric car, rather than buy it; the down payment and monthly expense is accounted for in your profit and loss account. This means that you can claim these costs fully against corporation tax.
However, if you lease a car rather than buy outright you will pay the lease cost plus VAT.
There is a 50% restriction on the recovery of VAT on lease cars. However, if you have a maintenance package within your lease cost, you can claim 100 per cent of the VAT back on that cost.
Another thing to consider when weighing up the pro’s and con’s of buying or leasing is technological developments.
Electric cars are ever changing. Buying outright allows you to keep the vehicle, something leasing doesn’t allow you to do. But buying outright leaves you vulnerable to outdated software and mechanics.
The short term nature of leasing allows you to gain access to the newest models, software and developments.
Charging Stations At Workplaces
The government funded Workplace Charging Scheme is open to businesses, charities and public sector organisations in England, Wales, Scotland and Northern Ireland.
You can find out more about applying for the grant here… GOV UK WCS
Another important point to note is that the installation of a charging station could result in a tax benefit.
While fully electric cars are exempt from vehicle tax, hybrid cars aren’t. You may have to pay in the region of £0 to £135 depending on the CO2 levels.
If you are an employer and are looking to install charging points at your workplace then you will be exempt from being taxed, however to get this exemption then the charging facilities must be on or near the workplace premises, it must be available to all employees and electricity must be provided to the charging point.
Can we help?
We hope you found this breakdown on buying and leasing electric cars helpful.
If you have any further questions about this and how it affects you or your business, then feel free to get in touch and our friendly team will be happy to talk it through with you!