How to buy an electric car for cheaper

I’m sure you’ve seen the masses of new electric cars on the roads. UK government are trying to move to a cleaner Britain and there are many tax incentives for you and your business to go electric!

What kind of car can you buy through your company?

You can buy any kind of car you like through your business but just because you could doesn’t mean you should. The UK tax system measures the amount of tax you pay on cars based on their emissions. Fully electric and hybrids work out significantly cheaper for you if you’re a business owner

How does the tax work for individuals with business cars

Any car with over 170 g/km of emissions has a benefit in kind* of 37% (37% is the max amount). If you buy a £50,000 car, the benefit in kind* is £18,500 and a higher rate taxpayer will pay £7,400 per year to drive the company car. If however, you buy a £50,000 fully electric car for your company the benefit in kind rate is 2% or £1,000. Leaving a higher rate taxpayer only paying £400 per year to drive it.

Benefit in kind* = Any non-cash benefit provided to you by your employer. As they all have monetary value they must be taxed as appropriate income.

Why you should buy an electric car through your company

Using your personal bank account to purchase a car means you have already paid tax on this money. Corporation tax at 19%, income tax at 20/40/45% or dividend tax at 7.5/32.5/38.1%. If we assume your business profit is £100,000, corporation tax is £19,000. You pay yourself a base salary of £12,570 (personal allowance) and pay the rest out in dividends. £2,000at 0% (dividend allowance). £37,500 at 7.5% £2,813. £43,500 at 32.5% £14.138. From your original profit of £100,000, you now have £64,049 excluding national insurance contribution.

Buying an electric car through your company can avoid all these taxes as the purchase is a tax-deductable expense, meaning your profit for the year is reduced. Electric cars get 100% first-year write off capital allowances, whereas cars producing more than 110 g/km get writing down allowance of 18% and cars above 170 g/km get a wring down allowance of 6%.

All costs relating to the maintenance of the car including insurance, MOT, service, and tyres are all tax deductible.

Can you claim mileage?

If you need to charge your car at home you can claim up to 5p per mile travelled on business to contribute to the cost of electricity being used when driven. These allowances are constantly being updated every quarter, so check out the gov.uk website for reliable, up to date mileage allowances!