With the world starting to turn its back on fossil fuels and looking for environmentally conscious alternatives, the rise of the electric car is in full flow. Big names in the car industry, including Kia, Nissan and Volkswagen are bringing out electric (or hybrid) options. If you have a car for business use, or perhaps a fleet of company cars, now could be the time to look at changing. Not only will you be avoiding using petrol or diesel to power your vehicle, after the initial purchase, electric cars are said to be cheaper to run. Did you know there are tax benefits too?
As the government see the benefits of these ultra-low emission machines, we need to first understand that there are different types of electric car. Pure electric, where the vehicle is charged by and powered by electric and as mentioned above, hybrid, where there is a conventional fuel (diesel or petrol) engine in the car with an additional electric propulsion system. These hybrids are sub categorised into ones which can be plugged into an electrical socket for recharging and those that can’t – in which case they are recharged by the engine or braking.
Now that the technical parts are out the way, for tax purposes, these vehicles need to have CO2 emissions which are 50g/km or less. These are then classed as ultra-low emission. This category should include all ‘pure’ electric cars, whilst the hybrids could be hit or miss. Do your homework before buying and be sure of the make and model you’re purchasing!
Salary sacrifice allows some employers and employees to pay less National Insurance Contributions (NICs) and Income Tax by replacing their cash salary with benefits in kind (BiKs). Even though there are limitations on said salary sacrifice, so this system isn’t abused, which is completely understandable, there are still ways to make potential savings by sacrificing part of your salary for an ultra-low emission company car. Companies might also be able to claim tax back for installing electric charge points at your home. There are also changes coming in 2020 which makes electric cars even more appealing, with the government stating that “this will support transition to cleaner, zero and ultra-low emission cars, helping to improve air quality in towns and cities and protecting the environment for the next generation.”
With the lack of traditional fuel in electric cars, claiming mileage is slightly more complex. With a ‘normal’ business car you can’t claim mileage allowance, but you can claim fuel expenses for all business mileage in a situation where you have paid for the fuel. Depending on the engine size of the car, petrol users start at 11p per mile. Since late 2018, an advisory rate for pure-electric cars is 4 pence per mile, even though electric isn’t currently seen as a ‘fuel’.
Now could be the perfect time to invest in electric vehicles for your business use. Get in touch with Clare at Bruton Young Bookkeeping for help with all your tax, VAT & accounts worries.