You might not have realised it, but there are huge tax benefits available (that could save your company some serious money) if you decide to take part in the electric revolution and purchase an electric car.
At present the UK Government wants to encourage all drivers to make environmentally friendly choices and it’s well known that tax policy has an effect on this. So, by rewarding drivers for choosing a low emission car they are hoping to encourage more of us to make the switch to electric.
If you’re a company director, driving an electric car is a very efficient way to extract funds from the company. If you are using your own car, a decision to buy or lease an electric car through the company could prove to be very rewarding. Your company will pay all the costs, they are tax deductible and you will pay no personal tax upon it. Basically it’s a win, win, win.
Is an electric car right for me?
- Electricity is not categoprised as a ‘fuel’, which means that you can enjoy using electricity paid for by your employer for both business and private journeys without triggering a fuel benefit charge
- All employees driving a fully electric car, with zero emissions, over the 2020/2021 tax year will enjoy a 0% BIK rate
- If you pay for the electricity yourself, you could be reimbursed at a rate of 4p per mile without triggering a tax bill (however charges are still applicable on hybrids)
Do I need to purchase a new electric car to benefit?
Even if you don’t want to buy a new electric vehicle, you can still benefit from reduced Benefits In Kind (BIK) tax levels for the 20/21 tax year. Cars registered before 6th April, 2020 and cars registered after 6th April, 2020 with emissions between 1-50mg and with a pure electric range of 130 miles or more, will also benefit from 0% BIK but this will rise to 1% during 21/22 and 2% in 22/23.
Business can also claim 75% of the total cost of installation of charging points for electric cars and benefit from no penalties for supplying electricity free of charge to its staff.
Modus Accountants are here to support you and your business. Yes, we can provide all your usual accounting services like payroll, bookkeeping, VAT, End of Year Accounts etc. But we can do so much more to add value and allow your business to thrive. Interested in finding out more? Get in touch with us today call us on 01993 225030 or fill in our contact form here.