3 WAYS ELECTRIC CARS WILL SAVE YOU £££’S
Thinking of going electric? Well the government has just announced that there will be NO company car tax payable on electric cars in 2020/2011. This represents a massive tax saving not only to employees but also employers.
This short guide will answer the 3 most common questions relating to tax electric vehicles.
· Are electric cars tax free? / What is the Benefit in Kind on electric vehicles?
· Do you have to pay road tax for electric cars?
· Can I claim capital allowances on company cars?
ARE ELECTRIC CARS TAX FREE?
Benefit in kind (BIK) rates for electric cars are dropping rapidly over the next 3 years. Currently (2019/20) the BIK rate is 16%. This is dropping to 0% next year in 2020/2021.
So how much will you save compared to a diesel or petrol alternative? Well lets take a BMW 3 series 320i Sport with a list price of £33,965 and Co2 emissions of 124 g/km. This will cost a 20% tax payer £1,956 per annum and a 40% tax payer £3,913 per annum.
The diesel equivalent, a 318d sport with a list price of £35,260 will cost a lower tax payer £2,186 and a higher tax payer £4,372.
The equivalent electric car will cost a lower tax payer £1,086 and a higher tax payer £2,173 in the current tax year 19/20.
Next year 2020/2021 this drops all the way to ZERO for electric cars.
Rates increase slightly thereafter. In 2021/2022 and 2022/2023 the benefit in kind will increase to 1% and 2% respectively.
This compares to rates of 21% to 37% for petrol and diesel cars with emissions exceeding 100g Co2.
It should also be noted that there is no BIK charge to employers who allow employees to charge their cars at work using employers electricity.
DO YOU HAVE TO PAY ROAD TAX ON ELECTRIC CARS?
No. Electric vehicles are exempt from road tax.
CAPITAL ALLOWANCES ON ELECTRIC CARS?
Unlike petrol and diesel cars, electric cars qualify for 100% first year allowances. Therefore, there is a significant 1st year tax saving to be made by investing in an electric car or van.
For example, if you purchase a petrol car for £30,000. Each year you are only allowed to off-set 18% of its value year-on-year as a tax deductible cost. In money terms, you will reduce your corporation tax bill by £1,026 in year 1.
However, for an electric car, the entire £30k can be used as a tax deductible cost, thereby reducing your corporation tax bill by £5,700 in year 1.
You may think that the main savings made by buying a company car are the fuel savings. Well yes. The savings in travel costs will be substantial and the more mileage you drive, the more you will save.
However, in addition to travel costs there are many other savings available for those who decide to buy an electric car or van.
To find out more on how to save money by going electric, contact us today on 0141 471 7990 or click the link below.