Many commercial travellers have a company car and they tend to be changed every 18 months or so, depending on mileage. But with tax penalties for driving petrol and diesel company cars now, is an electric car the way forward?
Years ago, company car users used to get tax incentives the more miles they drove for their business. However, times change and those incentives became penalties as the world moved into an anti-pollution climate.
When not on a Zoom call, it is likely that commercial travellers will still have a need to cover long distances to see customers and clients. Now, employers can claim a First Year Capital Allowance on the cost of a vehicle which allows them to reduce their taxable profits.
The car user themselves are usually taxed on the 'perk' of being able to make use of a company car, sometimes up to 35% depending on the vehicle. On a purely electric once, this tax is now zero percent, regardless of the vehicle's original cost. So, whether you choose the cheapest electric car available, or go for something more upmarket like a Tesla or Jaguar, it will cost you the same in tax ... nothing.
That really isn't a mistake. The employee does not pay tax on the benefit, at least until the 6th of April when it will increase to 1%. As an example, a commercial traveller earning £150,000 per year would pay only £630 tax on the benefit of using a £70,000 car!
Compare that with his boss driving a petrol BNW X7, paying £12,820 tax in that year. Who's better off? Additionally, electricity is not classed as fuel, so there's no taxable benefit there either.
But if you need some final temptation to make the leap to electric:
- an electric car can be offered using salary sacrifice
- there's no congestion charging
- no road fund license
- A subsidy of up to £3,000 for cars costing less than £50,000
- tax-free availability of charging points at employers premises
If you're thinking of changing your car soon, then it is definitely time to go fully electric. Forget the BMW X7 or the Mercedes SLK, instead think Tesla or Jaguar iPACE and save yourself a bundle in tax.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.