Buying an electric car through your company can produce significant upfront tax savings.
An electric company car costing say £65,000 new is wholly deductible as capital allowances in the year of purchase, meaning the full cost is deducted from taxable profits.
There is a benefit in kind where there is personal use, but this is just 2% of the list price – in this case, taxable income of £1300. Tax at say 40% on this is £520 – £10 per week equivalent.
The company also has to pay Class 1A NI on the benefit – at 13.8% – a cost of £179.
Care is needed to structure it correctly – the car needs to be new and unused, it must have zero emissions (be fully electric) and it has to be owned by the company.
If bought second-hand, 100% of the cost is no longer deductible. Instead, 18% of the balance each year can be deducted. If the car was bought second-hand for £65,000, the allowance in the first year is £65,000 * 18% = £11,700; this leaves a balance of £53,300 and 18% of that is claimable in year 2… and so on.
However, the benefit in kind charge and other charges are based, not on the price paid, but on the list price when new, which could be significantly higher.
Contact us to discuss this in more detail and also explore leasing scenarios.
