In simple terms, buying an 100% electric car through the company has the following tax advantages:
- The full purchase amount can be written off against tax:
- Only if the car is bought by the company and is new (so, not leased or second hand).
- Financed purchases are OK, so long as the company owns the vehicle on their balance sheet.
- If the car cost £50,000 – this would be written off against tax, saving approx. £9,500
- Although, if the car is sold at a later date, tax on the sale value will be due
- It’s unclear if electric cars would benefit from the enhanced capital allowances introduced in April – but this could be investigated if this was an option to you
- Benefit in Kind charge is 1% for 2021/22, 2% for 2022/23 and so on
- On a £50,000 car this would be £500
- Tax charge would therefore be:
- Basic rate tax rate: £100
- Higher rate tax rate: £200
A lease would have the same BIK benefits, but you don’t get the first year allowance tax write off.