Company Car Benefits ' Go Electric

Published date29 October 2021
Subject MatterCorporate/Commercial Law, Transport, Corporate and Company Law, Rail, Road & Cycling
Law FirmHillier Hopkins
AuthorMr Liam Henry

The government is making a bold commitment towards combatting climate change with the sale of new petrol and diesel cars to end by 2030.

With business owners making significant savings under the current tax regime over the next four years, businesses are taking the shift to all-electric seriously.

Back in the 1980s, company cars were the way to go for most businesses and their owners. The benefit in kind was cheap, capital allowances respectable, and the cost came out of pre-tax company money. Successive governments have, however, seen the company car as a cash cow, raising the tax cost of a car benefit to a level where they were only suitable for commercial travellers.

Technology has opened the door to all-electric cars that look, feel, and perform comparably with their petrol or diesel equivalents, together with a range of incentives to encourage businesses to choose electric vehicles as company cars.

Whilst most petrol and diesel cars get up to just an effective 1.14% annual deduction on the purchase price via capital allowances, the first-year allowance on a new electric vehicle equates to a 19% immediate discount, though some may be clawed back when you sell the car.

Electric vehicles are exempt from both first year and subsequent years road fund license. The tax on the director/employee who uses the car privately is currently based on 1% of the list price of the car when new (rising to 2% from 6th April 2022) and there is no tax on the benefit if the company pays for electricity.

A '350 grant is also available for the installation...

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