As business owners we are always looking to reduce unnecessary costs. And more and more of us are looking at ways of reducing our carbon footprint. Switching to an electric car could be an option for achieving both aims at once.
In this updated post we give our overview of the factors to consider to make an informed choice about going electric.
How you can save costs with an electric car?
The government is keen for businesses, and individuals, to adopt electric vehicles. They are offering some great incentives, introducing a system of grants and tax relief schemes:
- Plug-in Car Grant
The Government’s plug-in grant is, in effect, a discount off the price of a new, low-emissions vehicle. For cars costing under £32,000, the maximum grant is £1,500. For small vans the limit increases to £2,500, rising to £5,000 for large vans. However, the vehicle must be brand new and be on the eligible vehicle list.
The grant is automatically deducted from the retail price of eligible vehicles, so there’s no paperwork to fill out. For now, there is no limit to the number of grants the government is providing.
- Vehicle Tax
Vehicle (or road) tax depends on your vehicle’s carbon dioxide emissions. A 100% electric vehicle, with no CO2 emissions, is completely exempt from road tax. Hybrid cars still emit some CO2 emissions so they are still liable for some tax.
- Benefit in Kind Taxes
The benefit in kind tax rate on electric vehicles is currently 2% for this tax year and will stay there until April 2024. This is a big saving when compared to BiK rates of up to 37% paid by petrol and diesel vehicles. This tax is generally based on a percentage of the vehicle’s list price, increasing with CO2 emission rates.
- Congestion Charges
Low and zero emission vehicles are currently charged less and can even be exempt. In London, for example, electric cars are exempt from the congestion charge until 2025. With more and more cities across the UK introducing clean air zones, congestion zones and low emission zones and some towns and cities even offering free parking for electric vehicles, what’s not to like?
- Capital Allowance
If a vehicle produces CO2 emissions of less than 50g/km, it’s eligible for 100% first-year capital allowance. This means that with an electric car, you can deduct its full purchase price from your pre-tax profits.
From 1 April 2021 until 31 March 2023, there’s also a super-deduction capital allowance. This offers a 130% first-year tax allowance on qualifying electric charging points installed at off-road parking facilities at your place of work.
- Charging Points Tax Exemption
Dedicated charging points provided by an employer don’t count as a taxable “benefit in kind” for P11D purposes. As long as it is available to be used by all employees and is at or near the place of work.
Planning ahead for a switch to electric
The government’s electric vehicle infrastructure strategy sets out its plan of action for rolling out electric vehicle charging infrastructure. It aims to meet it’s objective of ending sales of new petrol and diesel vehicles by 2030 and for all new cars and vans to be fully zero-emission at the tailpipe by 2035.
This is a determined shift towards greener electric vehicles. Anyone thinking of investing in a vehicle or fleet of vehicles should consider the implications of set-up, running costs, and tax liability. Implementing a long-term plan to comply with new green policies. We have two contacts in our trusted Tribe network who specialise in Electric Vehicles; Hanna McLaughlin www.vehicleconsltingsolent.com and David Smith www.motorrepublic.com.
As with any tax relief or grant scheme, there are many conditions and timelines attached and expert tax advice can be key to making the right decision.
At Tribe Accounting we pride ourselves on being much more than bean counters. We work closely with our clients as financial planning advisors. We communicate in clear terms the cost and tax implications of business decisions.
If you need specialist advice or want to learn more about how you could gain from the various grants and tax relief schemes available, then give us a shout today.
Going green may cost you less than you think.