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 will benefit from 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 company car that is an electric vehicle but uses it for business journeys is entitled to claim annual tax-free mileage of 9p per mile from 1st March 2023. This allows an individual to be compensated for charging the car using electricity from their home.
With energy costs having stabilised for the time being filling up at the pump is still a sizeable drain on the bank account compared with the cost of filling up an electric car.
Should you decide to use electric vehicles for your business, you can install charging points at your home and the whole cost is tax deductible from your company.
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 2023/24, the percentage for an electric vehicle is only 2%, resulting in a much lower value for taxable benefit in kind. These are frozen at 2% of the list price until April 2025 and are only set to rise to 3% in 2025/26, 4% 2026/27 and 5% in 2027/28, so they are forecast to be extremely tax efficient for several years to come.
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, with average saving on purchase of new electric vehicles being several thousands pounds. Remember, these capital allowance benefits are only in place until 31st 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.