As life returns to normal after a variety of Covid-induced restrictions, people are starting to travel to the workplace again, and for some, the time may have arrived to consider that all important change of car. With the government having committed to phase out the sales of new petrol and diesel cars and vans by 2030, you might be wondering whether now is the right time to invest in a shiny, new electric car. So, did you ever wonder what the tax benefits are of having an electric car?
What are the tax benefits for having an electric company car?
Well, we have good news for you! There are a number of tax benefits arising from the purchase of an electric company car, and in this blog, I will outline the main ones.
If the car is purchased through the company…
Firstly, if the car is purchased through the company, it will be eligible for a 100% First Year Allowance relief. This means that the full cost of the car can be claimed in the year of purchase, assuming that profits are available. In addition to this, a super-deduction capital allowance of 130% is allowed on qualifying electric charging points, however, this is only available until 31 March 2023. After this, a capital allowance of 100% will be available.
As always, if you receive a benefit from a company, it may be taxable. In the instance of an electric car, the benefit in kind is determined by its CO2 emissions. For 2022/23, the benefit in kind for an all-electric car would be 2% of its list price. For example, an all-electric vehicle, costing £39,000 will give rise to a taxable benefit of £780 (2% x £39,000).
If the car is leased through a salary sacrifice scheme…
There is also the possibility of financing an electric vehicle through a salary sacrifice scheme. This can be extremely tax efficient for higher and additional rate tax payers, as the amount taxed (in the case of an all electric vehicle) would be the benefit kind (the calculation of which is demonstrated above), as opposed to the amount of salary sacrificed. To illustrate this, it may cost you £400 per month to lease a car through a salary sacrifice scheme. But instead of paying tax on this £400 per month, the tax would be calculated on the list price x 2%, which would be £780 in the example above. As you can see this is a huge tax saving.
(Not sure if you should buy or lease – check out our blog: Should I lease or purchase my new company vehicle?
Can I recover the VAT?
Unfortunately it is not possible to recover VAT on the purchase of an electric car, unless it is used 100% for the purposes of the business (and this means that it must stay at the business premises overnight). Where an electric vehicle is leased, 50% of the VAT paid on the leasing charge is recoverable.
If the tax benefits aren’t enough, just consider the massive amount of CO2 emissions into the environment that you will be reducing! Overall, it seems like a no-brainer – electric cars are definitely the way forward!
As always, for any questions that you have, please drop us an email to firstname.lastname@example.org and we will be happy to help!