Reducing your carbon footprint can be rewarding in many ways. You’re helping prolong our planet’s ecosystem, but what’s more, it can prove to be tax efficient.
Electric cars come along with many handy tax breaks, which could be very beneficial to your company. Here’s why you should consider trading in your expensive petrol car for a greener alternative.
If your company decides to invest in electric vehicles, it can benefit from a 0% payable road tax. The vehicle excise duty (VED) means any vehicle that’s 100% electric will not be liable to pay road tax until at least 2025. If you have a fleet of cars, this can save you a lot of money.
Using electric vans has advantages too, especially if you use them for personal reasons. As of April 2021, there are no tax implications if you use an electric business van outside working hours.
Any worker who owns a private electric vehicle but uses it for business journeys is entitled to claim annual tax-free mileage of 45p per mile for the first 10,000 miles driven. They can also claim 25p per mile for anything over the 10,000-mile threshold.
It’s no secret that fuel costs have skyrocketed over the last several months. Even with the cut to fuel duty announced in this March’s spring statement, filling up at the pump is still a sizeable drain on the bank account.
Should you decide to use electric vehicles for your business, you can install charging points before March 2023, with 100% of the first year’s allowances being claimable on the investment cost.
Capital allowances and benefits in kind
To incentivise businesses to adopt greener transportation, the Government has extended capital allowances relief for brand new, emission-free vehicles. This means the car’s total cost can be offset against your corporation tax bill in the year of purchase. The allowance will continue until 2025.
As a company, you may decide to provide a car to your hard-working staff. If you offer an electric vehicle, the tax will be much lower than that of a petrol or diesel car.
Currently, petrol and diesel cars can be subject to a benefit in kind charge equivalent to 37% of the list price of a company car, depending on the emissions they cause. In 2022/23, the percentage for an electric vehicle is only 2%, resulting in a much lower value for taxable benefit in kind.
Don’t hang around
These tax breaks for electric vehicles are a rarity, so making use of them in this current economic climate is an opportunity too good to pass up. Remember, these capital allowance benefits are only in place until March 2025.
The Government plans to ban the sale of cars fuelled wholly by petrol and diesel by 2030, with the sale of hybrid vehicles following shortly after in 2035. So switching over soon will keep you ahead of the curve and save you a lot of hassle further down the road.
The team at Spark Accountants can advise you on the most tax-efficient ways to use electric vehicles for your business.