With the technology behind electric vehicles improving year on year, it’s no surprise that switching to an electric car is an increasingly enticing option for drivers. As well as the environmental benefits, as a business owner, it could also make a lot of financial sense.
The main financial advantages are:
- Extremely low benefit in kind rate
- The company can often claim the whole purchase price of the car as tax deductible in the year of acquisition
- Government grants for EV chargers
- Reduced running costs, compared to petrol or diesel cars
- Exempt from road tax
Electric cars for employees – salary sacrifice
By taking advantage of the reduced 2% benefit in kind rate, and the continuing ability to provide a low emitting company car under a salary sacrifice arrangement, there are significant savings to be had for both employer and employees.
For employees, they are provided with a brand new company car, have reduced costs associated with running their own vehicle and they benefit from reduced tax and NIC costs. This is particularly beneficial given the 1.25% increase in NIC from April 2022. There can be further savings available, subject to the personal circumstances of the employees, for example, lower student loan repayments or a reduction in the amount of child benefit higher rate clawback.
For employers, there are both financial and commercial advantages to introducing a low emission company car salary sacrifice. These schemes allow a significant reduction in employer NIC costs, a reduction in the apprenticeship levy costs and significantly lower business mileage expense claims. Introducing a low emission car policy will help employers reduce their carbon footprint and, in our experience, employers who offer wider benefit packages to employees, see improved staff satisfaction and staff retention levels.
The Benefit in Kind rate for higher emissions vehicles is over 30%, so an electric vehicle could provide significant savings. Electric vehicle owners are also currently exempt from road tax.
Corporation tax savings
If the business purchases a new and unused electric car outright or via hire purchase, it can claim 100% of the cost against the profits in the year of purchase, so can result in a significant corporation tax saving.
Businesses can also claim capital allowances for the cost of installing electric vehicle charging points, benefiting from the new super-deduction, which offers 130% first-year allowance until 31 March 2023.
The Workplace Charging Scheme (WCS) is a voucher-based scheme that provides support towards the up-front costs of the purchase and installation of electric vehicle charge-points, for eligible businesses, charities and public sector organisations.
Workplaces can apply for vouchers using the Workplace Charging Scheme link below:
If you would like to enquire about Electric Cars or Salary sacrifice, please get in touch with Misty Nickells on 01392 241228 or email firstname.lastname@example.org