Electric Cars – companies

Electric Cars - companies

Electric Cars – companies

For a long time, it has not been tax efficient for owners of limited companies to have a company car. When a company provides an employee with a company car, it is deemed a taxable benefit. HMRC assess the value of this benefit and effectively tax the individual as if they have received that additional money as income. The company also pays National insurance on that amount. It is often therefore “cheaper” to withdraw the money to pay for the car and associated running costs personally.

In the 2022/23 tax year and frozen until 2024/25; the BIK (Benefit in kind) rates for electric cars are only 2%. This means that the taxable benefit (the additional income that you are taxed on for having a company car) is only 2% of the list price of the car.

For example, a new Tesla model 3 “performance” list price is £61,490

The taxable benefit on this is therefore £1,229.80.

For a basic rate taxpayer this would cost them £245.96 in tax per year, it would cost a higher rate taxpayer £491.92 per year. If you’re an additional rate taxpayer it would cost you £553.41 per year in tax.
It would cost the company £185.08 per year in Class 1A NI.

The company can then buy or lease the car, pay for all the maintenance, insurance and any other associated costs. This also reduces the profits of the company for tax purposes and the company can claim back 50% of the VAT on a lease. Finally, the company can also pay for an EV charging point to be installed at the employee’s home address.

So could you save money and pay less tax by driving an electric car?

Contact us to find out more.

Call: 01202 657444