Recently we discussed the taxable benefits of having an electric company car, reducing the benefit-in-kind tax for employers and employees. However, there are yet further savings to be realised beyond reduced P11d charges. Further savings can be made in a number of areas such as the Corporation Tax, reduced road tax and congestion charge exemptions.
First-Year Allowance
Understandably, the initial price of a new electric car is slightly higher than other versions. There is currently a 100% first-year allowance (FYA) available to all businesses purchasing ultra-low emission vehicles. Ultra-low emissions vehicles is anything from with emissions between 0g/km and 50g/km.
Example
Were you to purchase a company electric car within the 0-50g/km bracket, you can currently claim 100% FYA. This would result in a significant Corporation Tax saving. For example:
Purchase Price of new Electric Car: £35,000
Corporation Tax @ 19%: £6,650.
Lower Road Tax
It is common knowledge that lower emissions will reduce your road tax bill. However, are you aware of the latest regulations surrounding Vehicle Excise Duty (VED)?
Newly registered cars on or after 1st April 2019 are still subject to a tiered emissions system. However, cars registered on or after 1st April 2017 will pay tax differently. If it is the first time the vehicle has been taxed, it will be via a similar tiered system. However, the second tax payment, and any further tax payments will be due as follows, regardless of emissions level:
- Petrol or Diesel – £145 annual or £152.25 over 12 months
- Hybrid, bioethanol and liquid petroleum gas – £135 annual or £141.75 over 12 months
- Electric – £0
Congestion Charge Exemptions
As the government continue to crack down on CO2 emissions, we have witnessed the introduction of ultra-low emission zones (ULEZ). The theory behind ULEZs aims to help improve air quality within target areas. London was the first major UK city to adopt a ULEZ. Road users are charged a daily fee if vehicles don’t meet the emissions standards within the zone which operates 24/7.
The Scottish Government have also initiated adoption of ultra-low emission zones, when Glasgow’s first ULEZs came into effect on 31 December 2018. Initially it only applies to local buses, but as of 31 December 2022 it will apply to all vehicles within the designated zone. As of yet, the daily charge has not been decided. Councils in Edinburgh, Dundee and Aberdeen have also discussed bringing in ULEZs.
Switch to Electric
As the Government ramp up their efforts in a bid to improve air quality and lower CO2 emissions, a raft of changes are being introduced which will hit, and are currently hitting, motorists hard. It can be costly to introduce and run cars via your company. Therefore, now is the time to stay ahead of the game by switching off the petrol or diesel engine and switching on the electric; saving yourself and your business additional costs of running petrol, diesel or hybrid vehicles.
Not only would you save money on P11d tax, as previously discussed, but you could rule yourself out of having to pay steeper road tax charges, congestion charges and qualify for Corporation Tax saving via First Year Allowance.
If you are keen to discuss cost efficient ways of doing so for your business, speak to one of our experts today.
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