Whilst this topic has been heavily documented over the past few years, it’s still something we are asked regularly.  So here’s a quick recap of the different ways of purchasing an electric vehicle through your company.

Furthermore, as there is a wider choice of used EVs on the market we also look at the tax implications of new vs used cars.

If you run a limited company and are considering purchasing an electric car, you’ll be pleased to know that there are several ways to save on taxes. In this article, we will guide you through the process of buying an electric car through a limited company and help you maximize your tax savings. Let’s get started!

  1. Choose the Right Electric Car

For all the tax savings available, it’s essential that you choose an electric car that meets your needs.  Consider factors such as range, charging infrastructure, and suitability for your company’s purposes. Remember to check the vehicle’s CO2 emissions, as only zero-emission vehicles are eligible for the tax incentives below.

Your decision may also be swayed on whether you are happy to own an electric car outright or you would prefer to lease one.  With technology moving at a rapid pace and lots of new models coming out, you may prefer the option of simply handing a car back rather than have to sell it on.

  1. Corporation Tax savings

  • Buy a new EV

New EV’s are eligible for 100% First Year Allowances (FYAs) until April 2025. This means you can claim the entire cost of the vehicle against your company’s taxable profits in the year of purchase, reducing your tax liability.

  • Buy a used EV

Purchasing a used EV still has benefits and rather than claiming 100% first year allowance, a claim for 18% per annum allowance is available.

  • Lease an EV

You are purely renting the vehicle over an agreed term and will return it at the end of the agreement.

In this instance the monthly rental cost is shown within your company P&L and the rental payments will be tax deductible.

  1. Charging Infrastructure

Consider installing charging infrastructure at your business premises, such as dedicated charging points. These installations are also eligible for tax incentives, providing additional savings. Charging at work can be considered a benefit-in-kind for employees, but for company vehicles, it is tax-free.

  1. VAT Considerations

  • Purchasing a new or used car purely for business use

VAT can be claimed on the vehicle if it is used for business only, and there is no personal use.  Commuting from home to a workplace is not business use.

  • Purchasing a new or used car with personal use

Unfortunately the company cannot claim any VAT on the vehicle when purchased if there is personal use.

  • Contract hire

If you are leasing the vehicle you can claim back 50% of the VAT on the monthly lease payment.

  1. Benefit in Kind

As with all company cars, if there is personal use then a benefit in kind will arise.  The BiK rate for an electric car for 2023/24 is 2% and this is frozen until 2025.

Tax and National Insurance will be due as follows

  • The employee will pay: list price of the car x 2% x employee’s income tax rate.
  • The employer will pay: list price of the car x 2% x 13.8% (Employers NI rate).

Conclusion

EV’s continue to be a popular choice for both individuals and companies looking to reduce tax.

There are many tax benefits and you’ll help the environment at the same time.

Win win!

If you’d like a chat to discuss your options on how to buy an Electric Car through a Limited Company, please get in touch with us.

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