Electric cars are becoming increasingly popular as people become more environmentally conscious. The UK has been a leader in electric car legislation and, by 2040, aims to have every new car sold be an EV.
Electric vehicles have many environmental benefits, such as reducing greenhouse gas emissions and improving air quality. EVs are currently being offered to employees at a lower cost than petrol or diesel equivalents, resulting in positive impacts on the employee’s and the company’s finances. Additionally, this can help businesses reduce their ecological footprint.
With an array of models to choose from and appealing tax incentives (As of April 2020, the company car tax rate on fully Electric Vehicles (EVs) decreased from 16% to 0%), it’s no wonder that EVs are expected to become a staple on UK roads gradually. Some of the largest leasing companies have already mentioned they’re seeing double or even triple-digit growth in EV orders.
Although a few things have been holding people back from buying electric vehicles – like the cost, worries about how far they can go on one charge, and concerns that there aren’t enough places to charge them – EVs are much better for the environment. Therefore, we need more people to start driving them if the UK wants to meet its climate change targets.
The UK has not only pledged to reduce emissions as part of the Paris Agreement, but they have also committed to achieving a “net zero” target for greenhouse gasses by 2050. The government must tackle emissions from across the transport industry to reduce environmental impact. Focusing on corporate fleets can replace the mileage driven by fossil fuels, making “net-zero” goals more possible.
Can You Buy An Electric Vehicle Through Your Business?
Yes, you can. It is becoming increasingly popular for businesses to switch from petrol and diesel vehicles to electric cars as part of their overall green business strategy. Purchasing an EV through your limited company can result in significant tax savings for both the employee and employer.
When buying an electric car through a limited company, it’s important to know the different tax break options. As with any other business expense, the company can claim capital allowances on the cost of the car. This will reduce your overall taxable profits and could result in substantial savings for both the employee and employer.
In addition, several government-backed grants are available to support businesses looking to move away from petrol and diesel vehicles. These grants include the Electric Vehicle charge point grant, which gives up to £350 off the cost of an EV charger for your home or business.
Electric cars are also exempt from the Benefit-in-Kind (BIK) tax. So, if you purchase an EV through your limited company, you don’t have to pay any extra taxes.
Overall, there are many advantages to buying an electric vehicle through a limited company. EVs are becoming increasingly popular, and with the right tax breaks and grant opportunities, they can be a smart investment for businesses looking to reduce their environmental impact and save money in the long run.
Tax Benefits When Buying Electric Cars Through A Company
There are many tax benefits for purchasing electric cars through a company. Some benefits of owning an electric vehicle include decreased overall taxable profits and a £500 discount on an EV charger. If you purchase an electric vehicle (EV) through your limited company, you are exempt from paying Benefit-in-Kind tax.
Investing in an electric vehicle (EV) has many benefits, especially for businesses. EVs are gaining popularity and with the right incentives from the government, they can save you money while also reducing your company’s environmental impact.
Capital Allowances On Ev’s
You can receive a 100% First Year Allowance against your corporation tax bill if you purchase a brand new fully electric car through your limited company.
Companies can claim this capital allowance if the vehicle is purchased outright or through a hire purchase agreement, but not if the vehicle is leased under an agreement where the company doesn’t own it. It’s important to remember that when the car is sold, the company will have to pay taxes on any money made from the sale.
Corporation Tax When Leasing Electric Car
If the company leases a vehicle, the monthly rentals will be recorded as an expense in the profit and loss account. This deduction lowers the company’s taxable profit for the year.
Corporation Tax On Car Finance Or Hire Purchase (HP) For EV
Not only will the company obtaining the vehicle under a Hire Purchase (HP) agreement benefit from the 100% first year allowance, but it will also make corporation tax savings on the interest of monthly payments.
VAT On Electric Company Cars
If a company wants to reclaim the VAT on an electric vehicle they purchased via outright purchase or HP, the car can only be used for business and cannot be driven from home to work. The company can reclaim 50% of the VAT from lease payments if the car is leased.
Benefit In Kind (BIK)
Any car assigned to an employee for personal use will create a benefit-in-kind. The BIK rate, or how much the company pays based on the vehicle list price, is 2% for fully electric cars. Compared to petrol and diesel, there is a significant saving on behalf of the employer.
The company and employee are responsible for the tax and national insurance on benefits-in-kind.
The company will pay (List price of the car x 2% [current BIK rate for electric cars]) + (13.8% [Employers national insurance rate]).
The employee will pay: The list price of the car x 2% (the current BIK rate for electric cars) x the employee’s income tax rate.
Installing a charging point at an employee’s home address is not considered a benefit-in-kind if the company car is also provided.
Costs of Electricity for EV Charging
The company can benefit from the costs of electricity for charging an EV if they pay VAT on their energy bill. Companies that are eligible to reclaim VAT may recover up to 50% of this cost as input tax.
EV Solutions can help your business go green by installing charging points at the workplace for electric vehicles. This will improve your environmental credentials and encourage your staff to switch to an electric vehicle.
Electric Vehicle Grants
The government offers various financial incentives for companies switching to electric vehicles. By investing in an electric vehicle, businesses can reduce their carbon emissions, benefit from lower BIK rates and corporation tax deductions, and enjoy the available financial incentives.
Additionally, businesses can apply for the Workplace Charging Scheme, which grants up to £350 for installing an on-site charging point.
The less CO 2 your car produces, the lower the road tax. For emissions-free cars, the road tax is currently nonexistent for the 2022/23 year. Cars that cost more than £40,000 also receive an extra yearly fee of £335, which is waived for zero emission vehicles.
Not only are electric cars environmentally friendly, but they’re also cheaper to run than petrol cars. If you’re considering buying a new car, an electric one is worth considering!
Electric Company Car Guide By EV Solutions!
EV Solutions is a company that specialises in electric vehicle charging. We can help businesses transition to electric vehicles and provide workplace charging for employees.
We are authorised installers in the OZEV scheme and can help you secure this funding. The company also provides a comprehensive electric company car guide to help businesses understand the financial and environmental benefits of switching to an electric vehicle.
The guide explains how companies can save on costs by investing in an EV and offers advice on installing charging points for employees. By working with EV Solutions, businesses can reduce their carbon emissions, benefit from lower BIK rates and corporation tax deductions, and enjoy the available financial incentives.
With the help of EV Solutions, businesses can easily switch to electric vehicles. So what are you waiting for? Get connected with EV solutions and go electric today!