NEWS

Tax Benefits of Electric Cars for Businesses

The government has pledged that by 2040 all new cars will need to be either electric or some form of plug-in hybrid.  However, many within the motor industry predict that by 2025 one in three cars will include an electric powertrain.

To incentivise their take-up, significant changes to company car tax benefit-in-kind bands affecting vehicles that emit less than 75g of carbon dioxide for every km travelled were announced in Autumn 2017 Budget.  These low emission vehicles are referred to as ULEVs.

Below we outline some of the current tax benefits and implications for business vehicle owners:

•    100% first year allowances are currently available on new cars until 31 March 2021
•    The allowance will cover new equipment installed solely for the purpose of charging electric vehicles. This will be a taxable benefit if installed at home
•    The provision of a ULEV as a benefit-in-kind can form part of an effective salary scheme thereby reducing income tax and National Insurance contributions
•    The benefit-in-kind is currently 9% of the list price.  This is increasing to 13% in 2018/19 and 16% in 2019/20 but planned to drop to 2% from 2020/21.
•    As electricity is not a road fuel, the car fuel benefit charge does not apply to electric charging of company cars.  

The forthcoming changes mean that businesses, employers and employees will need to carefully consider their right choice of vehicle from a tax efficiency point of view.  Please let us know if you would like our advice in this matter.

 

28/02/2018