The environmental effects of global warming are such that it is perhaps a constant thought in our consciousness! The result is an increasing chorus of voices demanding swift change. Organisations are, of course, expected to play their part in altering how they do business. However, it need not cost the earth, far from it in fact!
Have you considered making a green investment that could also qualify your business for tax savings?
In this post, we're talking about trading in your existing petrol, or diesel, vehicle(s) for the long term benefits of electric cars in your fleet. Not only are they the future of road travel, but the government is considering a £6,000 incentive for motorists who buy into the electric upgrade!
It's a potential win-win which begs the question, why not!?
Following the budget in March 2020, Chancellor Rishi Sunak unveiled a £1 billion green transport package which included a huge £500 million for electric charging points over the next 5 years to deal with the envisaged demand. According to EDF there are currently 42,000 charge point connectors over 15,500 UK locations.
Go Ultra Low which is the Government and industry official electric car campaign promises there will be 6 fast charging points in every service station by 2023.
Image Source: Go Ultra Low, map of electric car charging point
There are several significant savings for those who invest in EVs. With lower running costs, exemption from road tax, reduced fuel and maintenance costs, and other incentives the cost benefits of purchasing an EV add up.
To put it simply, making the change to electric can put money back into your business in the long run.
There's no denying that EVs are an expensive initial purchase when compared to petrol, or diesel, vehicles but they can also save you money.
It's also important to recognise that electric car prices are not where they used to be. Now with more financial benefits and tax efficiencies for those who make the switch to EVs for their company fleet, and a subsequent increase in supply and demand, we're seeing more manufacturers begin to embrace the EV and hybrid trend. Furthermore prices for EVs are starting to reflect a more competitive market.
You can now buy a fully electric car for as little as £26k. Whilst still more expensive than petrol and diesel it’s a far cry from the Tesla models.
It's important to also keep in mind that there is the added expense of charging ports. and also electricity usage. However, as we mention below. there are significant incentives available to help offset these costs.
Savings that can be achieved will vary depending on individual circumstances. There are some inherent saving features that are common amongst EV owners, and this includes various UK electric car tax benefits and government incentives.
General savings: |
Additional incentives: |
|
|
|
|
|
|
When it comes to purchasing an EV the government has been offering a plug-in vehicle grant to help cover some of the cost. According to Go Ultra Low, they will pay up to £2,500 towards a new electric car that:
You will also have to pay to install charging equipment at home which can cost approximately £1k, but there are also government grants available to help with this expense.
For those purchasing vehicles with CO2 emissions of less than 50g/km that can drive at least 10 miles with zero emissions, up to £350 is available through the Electric Vehicle Homecharge Scheme. This estimates that charging your car at home can add between £450-£730 to your annual electric bill but this can be claimed through the business.
The government introduced tax changes from 6th April 2020 to help reduce the company car tax bills for those provided with an electric company vehicle. Benefit-in-Kind (BIK) taxation up to 2025 is quite low which allows employees/drivers to take home more of their pay. It works as follows and we've included rates for hybrid models as a useful comparison:
| CO2 (g/km) | Electric range in miles | 2021/22 | 2022/23 | 2023/24 | 2024/25 |
| 0 | Not applicable | 1% | 2% | 2% | 2% |
| 1 - 50 | > 130 | 1% | 2% | 2% | 2% |
| 1 - 50 | 70 - 129 | 4% | 5% | 5% | 5% |
| 1 - 50 | 40 - 69 | 7% | 8% | 8% | 8% |
| 1 - 50 | 30 - 39 | 11% | 12% | 12% | 12% |
| 1 - 50 | <30 | 13% | 14% | 14% | 14% |
| CO2 (g/km) | Electric range in miles | 2021/22 | 2022/23 | 2023/24 | 2024/25 |
| 0 | Not applicable | 1% | 2% | 2% | 2% |
| 1 - 50 | > 130 | 2% | 2% | 2% | 2% |
| 1 - 50 | 70 - 129 | 5% | 5% | 5% | 5% |
| 1 - 50 | 40 - 69 | 8% | 8% | 8% | 8% |
| 1 - 50 | 30 - 39 | 12% | 12% | 12% | 12% |
| 1 - 50 | <30 | 14% | 14% | 14% | 14% |
You can find the zero-emission range by the models of plug-in hybrids here. Of note, If you provide your employees with a electric van, and they only use it for business journeys and commuting, then that won't incur a taxable benefit.
Organisations that purchase and use low emission EVs in their fleet will benefit from:
For those running owner managed businesses that have cash on their balance sheets, and who may incur taxation on dividends when extracting money out of the company, this is definitely something to consider. The point being you can purchase the car out of pre-taxed income rather than post-taxed income.
Most people pay for their car out of their own pocket, that being ‘post-taxed’ income. For a director in the higher rate tax band they would pay 32.5% on any dividends extracted from the company.
If their company buys the car, the company will receive corporation tax relief and the director pays a very small amount of BIK tax. This certainly beats the 32.5% dividend tax rate.
For those wishing to improve their employees remuneration package this is a good deal for company cars and non-business owners too.
There are many options in terms of the funding available to help you with the initial expense of adding EVs as an effective travel solution for your fleet. We recommend that you speak with your business advisor to discuss the cost and savings involved, as well as the grants you may be eligible for moving forward.
The content of this post was created on 08/07/2020 and updated on 26/08/2021.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
LEAVE A COMMENT -