Whether it’s concerns over rising fuel prices or availability, or a growing commitment to sustainability, many business owners are thinking about going electric with their company vehicles. And there are numerous benefits to enjoy.
Driving a company-owned electric vehicle brings with it appealing taxable benefits. There is currently zero tax on Benefit in Kind for hybrid vehicles with emissions from 1-50g/km and a pure electric range of over 130 miles. The Benefit in Kind rate for electric cars is 1 per cent of list price for 2021-2022, but this is set to double to 2 per cent from 6 April 2022. This rate will then be frozen till at least 6 April 2025. These rates represent considerable savings for taxpayers compared to petrol-fuelled vehicles.
Electric vehicle charging
When it comes to charging a company electric vehicle, drivers who charge at home will pay the standard VAT rate of 5 per cent. Business electricity is charged at a standard VAT of 20 per cent. However, there is no fuel duty, which is currently 58p per litre before it becomes taxable.
If the company pays for the electricity, either by providing the member of staff with a payment card to use at public charging points, or by setting up a charging point at work, then there is no taxable benefit for the member of staff. However, if the vehicle is charged at home, from December 2021 the member of staff can claim 5p per mile for business journeys, compared to the previous 4p per mile.
Where the electric vehicle is in the name of the staff member, they can still claim the standard 45p per mile for business journeys up to 10,000 miles per year, and there will be zero road tax to pay.
Employers could avoid Benefit in Kind tax when providing electric vehicle charging points by ensuring that the electricity is provided via a dedicated point, that the facilities are provided at or near the workplace, and that the facility is available to all employees.
Capital allowance deductions
For companies able to buy an electric car outright, a 100 per cent capital allowance deduction for the cost can be made for the cost during the year of purchase, providing the emissions are less than 50g/km. Vans qualify for a 130 per cent deduction. Both represent considerable tax relief.
There are also government grants of £2,500 available for cheaper electric vehicles in some cases, and for installing charging points.
If you’d like to know more about taxable benefits for your business, you are welcome to get in touch with Office Assistants.