As time creeps on, it is becoming ever more apparent that at some point we will all be driving around in electric vehicles (EVs), with a ban on sales of new petrol and diesel vehicles slated for 2030.
So far, the Government have gone some way to incentivising people to seriously consider switching to electric or low emission vehicles, by way of the existing tax regime, as well as other associated grants, reliefs and benefits.
One such grant is the Plug-in Car Grant which, since March 2021, has seen the Government offer a £2,500 contribution towards the cost of an eligible plug-in vehicle (electric mileage range of at least 70 miles, and value <£35,000).
However, as of 15 December 2021, this has been restricted to a contribution of £1,500 towards pure EVs priced under £32,000.
Whilst the Government claim that this will help them to target funds towards more affordable EVs, to enable the money to go further and more people to make the switch, this remains to be seen. Restricting the grant, at time when motoring expenses are already elevated, could impede the decision to switch for consumers concerned about affordability.
The grant will be available until 2023, as it stands, and should be applied for automatically by the car dealer selling you the vehicle in question.
If you are thinking of purchasing an electric vehicle, for yourself as a director of a company or for an employee, there are a number of things to bear in mind.
Benefit-in-Kind (BiK) on EVs
The tax you pay on an electric vehicle is determined by its CO2 emissions but, in essence, lower emissions = more tax saved.
From April 2020, the tax charge for solely electric cars dropped to 0% and has been at 1% since April 2021. For the tax year 2022/23, it will increase once more, by one percentage point, to 2%.
However, this is still an extremely attractive proposition when you consider that vehicles emitting 1-50 CO2 (g/km) and with an electric mileage range of <30 will attract a tax charge at 14% for 2022/23, where registered after 6 April 2020.
You can find a full list of the BiK rates for cars in our Autumn 2021 Budget Summary, here.
Electric cars, charging points and capital allowances
From April 2021, the Government went one step further in respect of incentivising people to ‘go green’, by allowing pure zero-emission cars and vans, which are new and unused, to qualify for 100% first year allowance (FYA), with no upper limit on value.
Additionally, the super-deduction announced at Spring Budget 2021 affords for a 130% FYA on qualifying electric charging points, that are used within the business, for EVs, until March 2023.
VAT implications for electric vehicles
Whether electric or not, you are unable to claim VAT back on any cars purchased via your company unless you can evidence 100% business usage (which is often not possible).
If you lease the vehicle, rather than purchasing it outright, you can claim back 50% of the VAT on lease payments, or 100% where the electric vehicle is used solely for business purposes.
EVs and other tax considerations
If you are considering EVs as an alternative to fuel-run vehicles, you might also like to mull over the following key points:
- Salary sacrifice, where the benefit is valued at the higher of the salary given up or the taxable benefit, can be advantageous if you are a higher-rate or additional rate taxpayer. However, under the ‘optional remuneration rules’ this is only available where the company car’s CO2 emissions are greater than 75g/km.
- If you allow employees to charge their EVs via points at or near the workplace, at no cost, the electricity provided is not considered to be a taxable benefit.
- From April 2021, there are no tax implications for using a company owned electric van for personal use.
- Employees utilising private EVs for business journeys can claim an annual tax-free mileage allowance of 45p per mile for the first 10,000 miles and 25p per mile for any business miles thereafter.
How can George Hay help?
At George Hay, we understand that tax is an integral consideration in respect of having control of your business and planning effectively. We aim to save you time, eliminate confusion and maximise your tax efficiency. To find out more contact us on 01462 708810 or fill in one of our online enquiry forms here.