What Are The Benefits Of An Employer-Provided Electric Car?
Time to make the leap ...
Posted by Helen Beaumont on 03/03/2021 @ 8:00AM
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?
The tax benefits of an electric car for commercial travellers make it a great time to buy one!
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.
"So, is it beneficial to drive an electric car now?"
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 First Year Capital Allowances on the cost of an electric vehicle which reduces their tax bill.
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 one, 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 £315 tax on the benefit of using a £70,000 car!
Compare that with his boss driving a petrol BMW X7, paying £11,655 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.
Until next time ...
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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