TLC Loves… Electric company cars
29th June 2022
By now we’re all aware of the many benefits electric cars can have over traditional fuel-filled ones but making the switch to electric can still feel like taking a plunge into the unknown. As a small business owner who relies on your car, you may have questions like: ‘Will it get me from a-b without running out of charge?’ ‘Can I get tax relief if I buy one through my business?’ and ‘Will I be able to charge it when I’m at work?’.
We’re here to answer these questions and more with our helpful blog on why we love electric company cars for small businesses and why it might be a great move for your business too. If you’re thinking about buying an electric car through your business or just want to check that you’re already doing the right thing, just give us a call! We’re always on hand to help out.
Why your business should make the switch
Reducing your carbon footprint as a small business owner can feel like a mammoth task particularly if you own a fleet or have to travel a lot for work. But making the decision to go electric has many more benefits for business owners:
- Lower emissions when you travel
- Much lower running costs
- Lower maintenance as they use newer technology and have fewer moving parts
- 100% capital allowances on 100% electric cars for the first year (that do at least 130 miles on electric-only)
There are other benefits to going green, such as a higher resale value, as well as more choice than ever before as the electric car market continues to grow. One of the most attractive benefits for business owners is, of course, the capital allowances you can enjoy when buying through your company too.
The tax benefits of 100% electric company cars
The UK government want to encourage more businesses to go green, so you can claim 100% capital allowances on an electric car in your tax return whether it’s paid in full or on finance. This allowance is available in the first year of business and means if you buy an electric car through your business your taxable profit will be significantly reduced. In practice that means 100% of cost of your car is knocked off your profits, saving you the corporation tax on that amount. So a £50,000 electric car would save you £9,500 in corporation tax in the year you buy it.
If you choose to lease an electric car instead, the cost of the entire lease will go against your business profits, reducing your tax bill, and you’ll be able to claim 50% of the VAT from the VAT charged on the leasing costs.
There’s also a Benefit in Kind attached to having an electric car through your limited company. This is the tax hit you take because you benefit from using a car personally, not just for company business. It’s very low on 100% electric vehicles – just 2%, meaning you save money in your tax code. If you have a hybrid, the benefit in kind is calculated based on the electric range, so check with us and we can help you understand the personal tax cost.
When it comes to claiming tax relief on your mileage, the UK government has recently updated the mileage rate to 5p a mile for electric cars, which doesn’t include charging costs.
If you’re recording mileage for your business, don’t forget to record your trips by distance so we can account for your expenses when we do your accounts. All TLC clients have access to TripCatcher as part of our services. It’s an app that makes it easy to record your mileage.
What other business incentives grants are there for making the move to electric?
As well as tax relief on electric vehicles, there are grants your business can apply for to help spread the cost of installing chargers for the office. The government has recently created a workplace charging scheme for small businesses that invest in electric cars. This is a voucher scheme offering businesses £350 per electric port for a maximum of 40 ports, covering 75% of the cost of having electric ports installed.
So, should you go green for your business?
Ultimately, when it comes to making the right decision for your business, it’s down to you. If you’re still unsure how the capital tax reduction works or want us to help with calculations, why not give us a call? We’re always happy to talk through any kind of business decision and offer you the best kind of advice.