Electric cars are becoming more and more popular, particularly with business owners. What’s going on?!
The main buzz [pardon the pun] around electric cars is that they currently [oops did it again] have a very low benefit in kind (BiK) charge [sorry I can’t help it]. So the amount that the driver pays in tax for being provided with a free car is much lower than for a car running on fossil fuel. The most polluting cars incur a benefit in kind applied at 37% of the cars list price, whereas at the moment fully electric cars incur a benefit in kind at 2% of the list price. Shocking!
For example, a petrol car with a list price of £125,000 could cost an employee nearly £21,000 in tax, compared to £1,125 if it were electric.
On top of that, the capital allowances regime is much more generous for electric vehicles. If a company purchased a petrol vehicle, they can claim 6% of the cost of the car each year whereas a company can claim the full cost of the car in the first year – and if the vehicle was new, even more. In the example above the corporation, tax saving would be £30,000 in the first year.
Clearly, there are huge tax savings to be had for owner-managed businesses that are considering electric vehicles.
Having said that, the vehicles do tend to be more expensive for the equivalent models and an employee would need to consider how they would live with an electric vehicle.
As always we suggest you speak to us about your own particular position so we can advise on what’s best – but generally speaking, there are significant tax savings available by going electric.