Buying or leasing an electric vehicle (EV) can be a fantastic way for companies to reduce their carbon footprint while also enjoying significant tax benefits. As business owners become increasingly aware of the environmental impact of traditional petrol and diesel vehicles, more and more are considering EVs as a viable alternative. In this blog, we explore the tax benefits of buying or leasing an EV through your company and how AYUB Chartered Accountants can help.
Why You Should Buy An Electric Car?
Electric vehicles are becoming increasingly popular due to their eco-friendly nature, lower running costs, and high performance. Compared to petrol or diesel vehicles, EVs offer owners a wide range of benefits. For instance, they emit zero emissions, which makes them environmentally friendly, efficient, and they also provide a much smoother and quieter driving experience.
Corporation Tax
One of the biggest benefits of purchasing an EV through your company is the ability to claim a 100% first-year allowance on the cost of the vehicle. This means that the full cost of the vehicle can be offset against your company’s profits, lowering your corporation tax liability. In addition, EVs are subject to lower tax rates for the purposes of capital allowances, meaning that you could save even more on your tax bill.
VAT
When it comes to VAT, there are a number of benefits to buying or leasing an EV through your company. For businesses that buy EVs for business use, they are also entitled to recover VAT up to 100% of the purchase price. If you lease an EV, you can claim back 50% of the VAT on the monthly payments. This applies even if the car is for personal use.
In addition, if your company installs charging points for your EVs, you may also be able to claim back the VAT on the cost of installation. This can add up to a significant saving for your business.
This is a substantial incentive, considering that VAT can account for around 20% of the overall purchase price. Combined with the capital allowances, this can make a significant difference in the total cost of the car.
Benefits in Kind
Under current tax law, there are significant tax breaks for employees who drive EVs. As an employer, you can offer EVs to your employees as a company car or as part of a salary sacrifice scheme. Because EVs produce zero emissions, they are subject to lower benefit-in-kind rates than traditional cars. This can result in significant savings for you and your employees.
National Insurance
As with benefits in kind, the fact that electric cars are considered more environmentally friendly can lead to tax-saving opportunities. For example, employees that opt for an EV company car could benefit from paying less National Insurance on the benefit they receive.
Other Savings
Electric vehicles are highly energy efficient, which means lower annual running costs for you. Moreover, various local governments provide subsidies or tax reductions for EV owners, which can add up to significant savings over time. Some of the savings are as follows:
- Lower fuel costs: EVs are much cheaper to run than petrol or diesel vehicles. If you recharge your EV at your workplace or at home, you can claim the cost of the electricity as a business expense. This can save you a significant amount of money compared to the cost of petrol or diesel.
- Lower emissions-related charges: Many cities are now imposing emissions-related charges on vehicles that do not meet certain emission standards. Because EVs produce zero emissions, you can avoid these charges and save money.
- Congestion charge exemption: In certain cities such as London, electric vehicles are exempt from the congestion charge. If you frequently drive in congested areas, this can save you a significant amount of money.
Conclusion
Electric vehicles bring a wide range of benefits, which extends to tax relief. While the purchase price of an EV may be higher than petrol or diesel vehicles, the many tax incentives offered makes it a smart financial decision.
Not only can you claim full or partial VAT back, but you can also offset the cost of the vehicle against your profits to lower your corporation tax liability. In addition, the lower benefit in kind rates for EVs can make them an attractive option for employers looking to offer a company car or salary sacrifice scheme to their employees.
By investing in an EV, you’re not only making a greener choice but also tapping into considerable tax benefits.
At AYUB Chartered Accountants, we can help you navigate the tax implications of purchasing or leasing an EV through your limited company. Our team of experienced accountants will work with you to ensure that you are taking full advantage of all available tax benefits.
We can help you with:
- Choosing the right EV for your business needs
- Calculation of any capital allowances available
- Advice on claiming for charging costs as a business expense
- Optimizing your tax position
If you’re interested in purchasing or leasing an EV for your business, contact AYUB Chartered Accountants today. We can help you save money and do your bit for the environment!