Electric Cars – The benefits of going green
With the technology behind electric vehicles improving year on year, it’s no surprise that switching to an electric car is an increasingly enticing option for drivers. As well as the environmental benefits, as a business owner, it could also make a lot of financial sense.
The main financial advantages are:
- Extremely low benefit in kind rate which is currently set at 2% for Zero emission vehicles
- The company can often claim the whole purchase price of the car as tax deductible in the year of acquisition
- Government grants available for EV chargers at the workplace
https://www.westexesolutions.co.uk/post/unlocking-the-benefits-a-guide-to-ev-charger-grants - Reduced running costs, compared to petrol or diesel cars
- Exempt from road tax
Corporation tax savings
If the business purchases a new and unused electric car outright or via hire purchase, it can claim 100% of the cost against the profits in the year of purchase, so can result in a significant corporation tax saving. It is worth noting that ex demo cars also qualify and have a lower purchase price.
Businesses can also claim capital allowances for the cost of installing electric vehicle charging points at both the work premises and director’s home address.
Government grants
The Workplace Charging Scheme (WCS) is a voucher-based scheme that provides support towards the up-front costs of the purchase and installation of electric vehicle charge-points, for eligible businesses, charities and public sector organisations.
Workplaces can apply for vouchers using the Workplace Charging Scheme link below:
https://www.westexesolutions.co.uk/post/unlocking-the-benefits-a-guide-to-ev-charger-grants
Benefit in Kind
The benefit in kind rate for electric cars is extremely low, at only 2% of the list price. This makes it significantly more tax efficient compared to petrol or diesel alternatives, which have BIK rates of up to 37%.
To put it in perspective, if we compare a Tesla Model Y long range dual motor with a Ford Mustang, with a similar list price, the benefit in kind tax for a basic rate taxpayer would be £220 for the Tesla, compared to £4,224 for the Mustang.
Electric cars for employees – salary sacrifice
By taking advantage of the reduced 2% benefit in kind rate, and the continuing ability to provide a low emitting company car under a salary sacrifice arrangement, there are significant savings to be had for both employer and employees.
For employees, they are provided with a brand new company car, have reduced costs associated with running their own vehicle and they benefit from reduced tax and NIC costs. There can also be savings available, subject to the personal circumstances of the employees, for example, lower student loan repayments or a reduction in the amount of child benefit higher rate clawback.
For employers, there are both financial and commercial advantages to introducing a low emission company car salary sacrifice. These schemes allow a significant reduction in employer NIC costs, a reduction in the apprenticeship levy costs and significantly lower business mileage expense claims. Introducing a low emission car policy will help employers reduce their carbon footprint and, in our experience, employers who offer wider benefit packages to employees, see improved staff satisfaction and staff retention levels.
If you would like to enquire about Electric Cars or Salary sacrifice, please get in touch with Misty Nickells on 01392 241228 or email misty@griffinaccountancy.co.uk
