EV Benefits
No London Congestion Charge
No Road Tax
No Fuel Benefit to pay if 100% electric
The cost of fuel is also considerably lower
Leasing – two ways to do this
• If the company will own the car at the end of the lease, as the Co2 is under the threshold of 50g/km, the full cost can be offset against profits before tax or so called First Year Allowance
• If the company will not own the car at the end of the lease, as the Co2 is under the threshold of 110g/km, then you can deduct the full monthly cost from the company profits
VAT
If you are solely using it for business purposes, you can reclaim the VAT and off-set the purchase price against corporation tax making significant savings.If you buy an electric car through your business but intend to keep it for personal use only, it will be considered a benefit in kind and will be subject to tax as if it were income. For most, there will be a portion of both business and personal use, giving a corporation tax saving to the company and a benefit in kind charge to the individual – fortunately this benefit in kind charge is relatively low for electric cars.
Employee Benefit in Kind Tax
This year 2023/24, the electric vehicle company car tax rate stands at just 2% of an EV’s taxable list price. This is also known as the P11D value.
The following year this 2025/2026 = 3% BIK, 2026/2027 = 4% BIK, 2027/2028 = 5% BIK
For example, a fully electric car with zero emissions and a retail price of £30,000 would therefore have a BiK of £600 in the 2022/23 tax year. This figure would then be added to your total taxable earnings and will have tax charged at the relevant rate, which is determined by the level of your total earnings. This calculation will be completed within your personal tax return each year. So, if you are within the basic rate band your tax payable for 2022/23 would be £120 (£600 x 20%).
Employers National Insurance
Whatever the Benefit in Kind (BiK) value is for the employee, there is an Employers NI charge of 13.8% per annum.
The company will have some statutory requirements to complete annually.
P46(car), informing HMRC that a car is provided to employee for private use.
P11D, issued to employee for their self-assessment return to report the benefit in kind.
Government grants
From 18 March 2021 the government will provide grants of up to £2,500 towards the cost of an eligible plug-in vehicle where it costs less than £35,000. Therefore, this will cease to apply for higher priced vehicles. The plug-in car grant applies at the time of purchase and is usually given as a discount off the purchase price of a vehicle. The vehicle must have an electric range of at least 70 miles.If plug-in hybrid, the vehicle must also have combined CO2 emissions of 50g/km or less.
Example of Car purchased through the company (company is not VAT registered):
Consult Ltd purchases through the company a fully electric car costing £30,000 with zero CO2 emissions.
(a) The company saves claims the full purchase cost as a capital allowance reducing corporation tax by £5,700 (19%*30,000).
the director uses the car personally and therefore receives a benefit in kind (BiK) which will be taxable. She is a basic rate taxpayer for the year in question. Because of the vehicle is fully electric (zero CO2 emissions), for the 2022-23 tax year the vehicle would incur a 2% benefit in kind (BiK) rate.
(b) The director’s BiK is £600 = £30,000 * 2%. Because she is a basic rate taxpayer, she will pay 20% personal income tax on the £600 Benefit in Kind.
(c) The director will face a personal tax liability of £120 (20% * £600)
(d) The company pays employers NI of £83 (13.8% * £600)
So overall for the company, it has spent £30,000 to purchase the car, plus it will pay employers NI of £83, while also enjoying company tax savings of £5,713 ((30,000 + 69) * 19%), so the overall cost of the business in year 1 is 30,000 + 69 – 5,713 = 24,356.
The car purchase “costs” the director £120 in tax in year 1.