In light of the government’s aim to cease the sale of petrol and diesel cars by 2030, there are still perks to be had should your business wish to switch its existing fleet of vehicles to electric.
For the income tax year 2020/21 the taxable benefit for directors of limited companies and their employees who drove fully electric cars was 0%, for 2021/22 (current tax year) this is now 1% and for 2022/23 (next tax year) this is 2%.
If for example a company purchases a Jaguar I-pace with a list price of £70,000 (292-mile battery range) the benefit in kind for 2020/21 was £0, for 2021/22 it will be £700 and for 2022/23 it will be £1,400.
It was confirmed in the March 2020 budget that the 2% benefit in kind rate for 2022/23 would be extended for 2023/24 and 2024/25.
Other benefits of investing in electric cars include 100% capital allowances on the initial car purchase and 100% capital allowances on the installation of charging points.
To qualify for 100% capital allowances the car must be purchased new (i.e. factory fresh with only a very limited delivery/demo mileage). To enable 100% capital allowances to be claimed on charging points these must be new and unused and be installed at or near an employer’s workplace.
There is additionally no fuel benefit where the employer pays for the cost of charging an electric vehicle, because for car benefit purposes electricity is not classified as a fuel.
Where an employee doesn’t have an employer provided car (i.e. they use their own car for work) were the employer to pay for the installation of a charging point at the employee’s home the installation will attract an annual taxable benefit in kind based on 20% of the market value of the installation.
Should an employee travel on business in their company provided car and need to charge the car the employer can reimburse the employee at the rate of 4p per mile per business journey. Where an employee uses their own electric car for business journeys an employer can reimburse the employee 45p for the first 10,000 business miles travelled and 25p for each business mileage travelled thereafter.
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