Buying an Electric Car? You May Find This Useful!
How Will The New Rules For Electric Vehicles Affect You?
If your employer has provided an employee with a fully electric vehicle, your benefit in kind tax from 6 April 2020 will amount to £0.
- This is because the benefit in kind percentage will be 0%!
- How huge is this? Well, quite a lot as it can be up to 16% of the list price of the car!
- Nevertheless, please note that for FY2021-22, the benefit in kind rate will go up to 1%.
- Similarly, for FY2022-23, the benefit in kind rate will go up to 2%.
How Much Can An Electric Vehicle Reduce Your Business Tax?
A fully electric vehicle can reduce our business tax quite a lot.
For instance, if you buy a fully electric vehicle for £20,000, your profits should reduce by £20,000.
Resultantly, your business tax savings could be as much as:
- £5,800 for sole traders and partnerships
- £3,400 for limited companies
How Much Can Employers Save On Their National Insurance If They Buy An Electric Vehicle?
Employers usually pay national insurance on the benefit in kind value of the vehicle. Therefore, you will not have to pay national insurance on benefit in kind if it is zero.
This is a good saving amount as the national insurance on benefit in kind usually is 13.8% (based on FY2020-21 tax rates).
Are There Any Changes In Benefit In Kind For Electric Car Planned For The Next Year?
As already discussed, benefit in kind for electric vehicles will go up to:
- 1% from 6 April 2021
- 2% from 6 April 2022
Both of these are much lower than the previous 16%.
Should You Buy An Electric Car Through A Limited Company?
Pure electric cars with CO2 emissions between 0 to 50 g/km (electric range >130 km) are highly recommended.
This is because from April 2020, its cost will be tax deductible and there will be 2% benefit in kind in the first three years on which the income tax is negligible.
See the table below showing benefit in kind percentages for cars with an electric range of less than 130 km:
Please note that the benefit of buying an electric car through a limited company will be realized in terms of its cost claim.
Also, you will be able to claim full purchase costs of the car as tax deductible expenditure if you buy it through a company.
Does The Government Provide Any Grants On Buying An Electric Car?
Yes. These vehicles include a plug-in grant from the government with the maximum available grant of £3,000.
To ensure that you receive this grant, take a look at Category 1 vehicles on low-emission vehicles eligible for a plug-in grant.
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Is An Electric Car As Environmentally Friendly As Generally Believed?
While electric cars help reduce emissions, it may come off as a surprise that it costs double the amount of electricity to make a tesla than an ordinary vehicle!
Add to this the strain on the national grid if everyone starts plugging in their cars, and the claims of environmental friendliness will become hazy.
Is There Anything Else You Need To Know About Electric Cars?
As discussed above, the emissions in production are thought to be almost twice as high as a petrol/diesel model.
Secondly, the charging network is not yet fully developed making it quite difficult to achieve the advertised ranges unless everything is perfect.
Finally, there are serious concerns over resale value given the battery life and difficulties in replacing them.
Despite these challenges, the technology is improving and gaining support every day with a lot more electric car models set to release this year!
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