Why you should consider buying an electric company car
Company cars have long since been regarded as a method of remunerating directors and employees. The heavy personal tax costs of receiving the ‘Benefit in Kind’ (BiK) have made the benefit onerous on the employee and the deduction allowed against profit has had less value in a time of relatively low Corporation Tax rates. The tax authorities have changed their tune in recent Finance Bills and have introduced a significant change in the way that the BiK will be calculated in the future for electric and hybrid vehicles. HMRC guidance can be seen here.
Benefit in Kind
The BiK is calculated by applying a percentage to the list price of a vehicle.
The percentage applied is calculated by reference to the CO2 emissions (g/km). In 2020/21, this was updated for electric vehicles to an assessment based on the electric range for hybrid vehicles and a flat rate for all totally electric models.
BiKs are reported to HMRC on a Form P11d and this must be filed by July following the end of each Financial Year.
A company will pay 13.8% National Insurance on the Benefit in Kind (i.e. the list price x the appropriate percentage rate)
100% First Year Allowances are available on new and unused cars with CO2 emissions of 50g/km or less.
Grants may be available on purchase.
Vans that qualify as commercial vehicles will be eligible for the Annual Investment Allowance.
Running costs are deductible against profit including installation of charging points. If an employee charges their vehicle using a charging point provided by the company, this is NOT assessed as a BiK.
Please get in touch with us if you have any questions about whether an electric car would be a smart investment for your business.