Electric cars – tax relief getting better?. As more and more electric cars become available in the market place should you be considering the company buying you a new car?

Originally HMRC provided a very good tax incentive for companies to buy electric cars instead of petrol and diesel cars. If the electric car had a zero emission, then an employee could use it effectively tax free! As there was no benefit in kind assessable on the employee then the company did not have to pay any national insurance – all good news!

What changed?

HMRC gradually increased the tax rates over the tax years for cars falling within the 0 to 50g/km emission bands from 0% to 16% for 2019/20 – very expensive!

However, from 2020/21 electric cars suddenly become more attractive because the new bands for electric and hybrid cars will be introduced.

So, for cars with 0g/km emission, the percentage will be 0% and cars with an emission of 1 to 50g/km and with a range of 130 miles or more will also have a percentage of 2%.

Example

An electric car with a list price of £25,000 and zero emission the benefits in kind would be calculated as follows:

• 2018/19 £25,000 x 13% = £3,250
• 2019/20 £25,000 x 16% = £4,000
• 2020/21 £25,000 x   0% =         £0  – good news!

Even more good news!

Companies can claim 100% first year capital allowances on new electric cars with emissions of 50g/km or less. Therefore, the full cost of the car can be deducted from the profits generated by the company.

So it is important to take tax planning advice before you purchase your next car.

Further Reading:

Get the Taxman to buy your company car?