Over recent years, owning a conventional personal car via your company has not been an attractive proposition; expensive ‘benefit in kind’ charges, an exorbitant fuel benefit charge (for personal usage) and the relatively low advisory rates on fuel reimbursement made it a non-starter for many company Directors. Even mid-range petrol and diesel executive cars can generate personal tax charges via your P11D of hundreds of pounds per month.
Electric Cars can make the cost of having a company car much more palatable for a variety of tax related reasons.
Personal Income Tax – P11D.
The car benefit for 2021/22 is currently 1% of the list price for electric vehicles which have CO2 emission of 0g/km [rising to 2% in 2022/23].
For example, running a £50,000 fully electric company car would generate a personal tax charge for you as the employee of just £200 per year for 2021/22 – assuming your marginal rate of tax is 40%.
The employer’s Class 1A NIC payable by your company on the car benefit would also be a correspondingly low £69 per year.
First year enhanced capital allowances of 100% can be claimed against your company profits on the cost of the vehicle; as such, you can completely write off the cost of the vehicle against your turnover and save 19% corporation tax in the year of acquisition – in our example this takes the net cost of an £50,000 electric car down to £40,500.
Charging Stations & Personal Mileage
It may also be worthwhile to install a charging point at your place of business or office.
‘Super Deduction’ capital allowances of 130% can be claimed against the cost of the charging point and written off to the P&L.
For example – a £1,500 charging station would only have an effective ‘cost’ of £941.25:
- Input VAT of £250 can be reclaimed fully as normal business expenditure.
- 130% capital allowance claim on net cost of £1,250 – reduces your company’s corporation tax bill by £308.75.
Personal and Business Mileage
- Once installed, you can ‘fill up’ at your company charging station tax free, even for personal usage; no benefit in kind is due on your P11D because electricity is not classed as fuel.
- The electricity used in charging your company car is also deductible as a regular trading expense of the business.
- Any business miles you perform can be reimbursed to you at 4p per mile tax free regardless of where you charged the battery.