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Electric cars and vans, is it time to switch for your business?
Friday 1st October 2021
Various sources
Here at Think Smart Accounts, we examine some of the pros and cons with electric cars and vans for your business?
Electric vehicles for business have been increasing in popularity in recent years due to their environmental benefits, lower running costs, and a range of government incentives. Following the continued fuel shortage/delivery problems of this week is it time to make that change? The main-stream media have been reporting that dealerships have been inundated with enquiries this week, so we have decided to summarise some of the main pros and cons when considering your next company vehicle options.
What are the advantages?
• The running costs are much lower; charging an electric vehicle could cost you a fraction of what you'd usually be spending on fuel.
• There are clear environmental benefits; one electric car can save approximately 1.5 million grams of CO2, according to EDF Energy.
• There are a range of government incentives and tax benefits available for business owners who have electric vans and vehicles. If you buy an electric vehicle for work, you can benefit from the government's low-emission vehicles plug-in grant.
• The maximum grant for cars is £2,500, while the grant will pay a maximum of £3,000 for small vans, £6,000 for large vans, and £16,000 for trucks.
• Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.
What are the disadvantages?
• Most electric vans won't be able to travel as far as diesel or petrol vehicles without needing to be charged, maybe a hybrid is the best of both worlds ?
• It's likely you'll need to install a charging point at home or at work, which is an extra cost to consider, in response to this, the government has introduced an Electric Vehicle Home Charge Scheme, which offers up to 75 per cent towards the cost of installing electric vehicle charge points at people's homes. There is also the Workplace Charging Scheme, which offers vouchers towards the cost of buying and installing an electric vehicle charge point at a workplace.
• The initial cost of buying an electric car or van for your business is likely to be higher than buying a petrol or diesel vehicle.
• Though manufacturers tend to offer compelling warranties on the longevity of EV batteries,
battery degradation has been a big worry for many about electric cars. The fear that replacing the battery will be necessary and expensive, as manufacturers typically only offer a 6-8 year warranty on batteries but can be north of £5k to replace when needed.
What are the tax benefits of having an electric vehicle for your business?
Capital Allowance incentives, cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.
A company will be able to provide its employees or directors with an electric vehicle with a low taxable benefit implication. Low taxable benefit means that not only do the employees save tax at their relevant rate, but the Company also will save on Class 1A National Insurance.
The benefit in kind tax rate for employees with electric cars and vans used to be 16 per cent. However, it was set at one per cent in April 2021, increasing to two per cent from April 2022 to April 2025.
This means it's now a lot cheaper to have an electric company car. What's more, the benefit in kind tax rate for higher emissions vehicles is over 30 per cent, meaning electric car drivers make a significant saving.
Electric vehicle owners are also exempt from the following:
• vehicle excise duty
• van benefit charges
• fuel benefit charges
• fuel duty
If you buy an electric vehicle personally (rather than receive a company car), you can claim 45p per mile as a business mileage expense, however if you have a company car and charge it via your domestic supply, you are able to claim 4p per mile for business use.
In London, electric vehicle owners don't have to pay the congestion charge, saving £15.00 a day in advance (or £17.50 when paid on the day), you'll also be exempt from paying £12.50 a day as part of the ultra-low-emission-zone (ULEZ). There are similar ULEZ schemes in operation in Birmingham, Bristol, Bath, with more major cities in the United Kingdom due to introduce the ULEZ scheme in the last quarter of 2021 & 1st quarter of 2022, .
There is no one size fits all answer, want to find out more about the specific savings you can make, email us on info@thinksmartaccounts.com to arrange an initial chat.