Tax on Electric Cars – A Guide

Electric cars can make the cost of having a company car much more palatable than the tax charges for running a petrol or diesel company car. This provides a lower benefit in kind value for employees and lower employer Class 1A national insurance contributions. For businesses, it can also assist with their ESG and lessen their impact on the environment.

Below is a summary of some of the key issues companies and company car users should review when considering electric cars.

Personal Income Tax on Electric Cars: Low P11D Value

The car benefit for 2023/24 is currently 2% of the list price for electric vehicles that have CO2 emissions of 0 g/km [which is set to remain until 2024/25].

For example, running a £50,000 fully electric company car would generate a personal tax charge for you as the employee of just £400 for the 2023/24 tax year. This is assuming the marginal rate of tax is 40%.

The employer’s Class 1A NIC payable by a company on the car benefit would be a low £138 per year.

Capital Allowances: Car Purchases

First year enhanced capital allowances of 100% can be claimed against your company’s profits on the cost of the vehicle. This means a business can completely write off the cost of a vehicle against turnover. Therefore, corporations save on corporation tax in the year of acquisition.

Tax on Electric Cars: Leases

If the business takes an operating lease, 50% of the VAT charged per month can then be claimed as input VAT where the car is provided to an employee and there is an element of personal usage.

Charging Stations & Reimbursement of Fuel

It may also be worthwhile to install a charging point at your place of business or office. Providing electricity to employees for personal use does not give rise to a taxable benefit.

Capital allowances of 100% can be claimed against the cost of the charging point. This can then be written off to the Profit & Loss account.

An employer can pay for a charging point to be installed at an employee’s home to charge their car. No taxable benefit will arise from this. Any fuel paid for by the employee can then be reimbursed at 10 pence per mile based on the current advisory rate.

The electricity used in charging a company car is also deductible as a regular trading expense of the business.

Charge cards of £100 a year can be provided to employees to allow individuals access to local authority charging points. In such cases, no taxable benefit will arise.

Alexander & Co – UK-Wide Tax Advice for Businesses

Alexander & Co provides comprehensive tax and accountancy services to a wide range of firms across many business sectors. With offices in London and Manchester we are well placed to advice clients nationwide.

To discuss how we can assist your business, please contact us. Please email or complete the form on this page, and we will be in touch.

Further Reading


Previous Article

Basis Period Reform

Basis Period Reform – changes to declaring tax for self employed and partnerships

Next Article

Bank of England bank rate

Bank of England bank rate unchanged after 14 consecutive increases

Contact a professional now