We all know that switching from gas guzzlers to electric cars is an important move for the planet. But there’s a hidden benefit for your business too. One that might make you revolutionise your attitude to company cars.
Intrigued? Let’s take a look under the bonnet.
The government wants us to go electric. With tough climate change targets to hit, they need a near-miracle to get us all to cut our carbon emissions. And that’s why they’re offering a range of incentives to businesses and drivers of company cars, to encourage the switch.
So if you’re a subscriber to the old view that company cars are tax inefficient, here are five reasons it’s time to change your mind.
1. You’ll save on corporation tax
In the year of purchase, you can claim 100% of the cost of a brand new fully-electric car (with 0% emissions) against corporation tax.
What’s more, if you install electric charging points at work, that cost is also eligible for 100% allowance against corporation tax.
2. You’ll save on Benefit in Kind (BIK) charges
BIK is a tax on employees who get perks on top of their salary. Anyone who has a company car that they can use for private trips has to pay a BIK contribution. So the government has introduced BIK incentives for both employers and employees, to encourage them to choose electric.
BIK charges are based on the value of the car and its CO2 emissions – the good news is that the charge for fully electric cars is currently just 2% of the list price. That’s a big saving on the least efficient cars, which can have a BIK charge of up to 37% of the list price.
As well as the cost of the car itself, HMRC doesn’t class electricity as a vehicle fuel (unlike petrol and diesel) and there’s no BIK tax for a business that wants to let employees recharge their cars for free. If you want to encourage your employees to consider electric cars, free charging can be a good incentive.
3. It’s easy for staff to claim back home-charging costs
If your staff charge their company cars at home, it can be tricky to work out how to claim that cost back. The easiest way is to ask them to claim 5p per mile, tax-free, for business journeys. As the employer, you can also claim these payments against corporation tax.
4. You might be eligible for grants
The Workplace Charging Scheme covers up to 75% of the cost of buying and installing electric vehicle charge points at your business.
Meanwhile, the government’s plug-in grant scheme could save you £1,500 off a specific list of approved electric cars and vans that cost less than £35,000.
5. Vans are included too
The rules on electric vans are a bit different to cars, but they also come with benefits. For example, a fully-electric van has 0% BIK charge – compared with a hefty £3,600 charge for private use of a petrol or diesel van.
The 2021 March Budget introduced the super-deduction scheme. Intended to encourage businesses to invest in assets such as plant and machinery, companies can deduct 130% of the cost of an asset from their profits before tax, in the year of purchase. And it includes vans too. The scheme runs up to March 2023, so you’ve got plenty of time to turn your van fleet electric.
Of course, if you’d like to know more about tax breaks for electric vehicles in your business, you can always get in touch for a chat.
And even if you don’t want to invest in electric cars through your business, you can still help your employees to do their bit for the planet and switch to electric vehicles. Many dealers run the electric car equivalent of the cycle to work scheme (otherwise known as salary sacrifice), which can save employers money on tax and National Insurance.
Are you missing out on other tax benefits? Check out our practical guide to the latest financial changes you should know.
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