As more and more vehicle manufacturers release all electric products, an increasing number of businesses are choosing to go fully green and acquire a zero-emission vehicle. Approximately 6.5 million households in the UK are planning to purchase an electric car by 2030, which coincidentally is the year in which the UK government will introduce a ban on the sale of petrol and diesel cars.
For many people and businesses electric cars remain too expensive to buy, yet with technology forever increasing, older models becoming cheaper and tax benefits providing a further incentive, the electric car market is on the verge of exploding. Only a few years ago, most electric cars could only withstand a mere 100 miles or so on a full charge of battery, whereas now models are being released which have more than triple that life expectancy.
The COP26 summit in Glasgow, where world leaders are gathering to make a breakthrough in saving the planet from reaching 1.5℃ by 2030 as well as how to reach net zero emissions by 2050, echoes the sentiment that clean energy innovation is needed immediately. We break down the benefits, in terms of both sustainability and financially, in buying an electric vehicle as well as announcing a new initiative by Nordens in offsetting our carbon footprint.
What Are The Tax Benefits For Buying An Electric Car?
What many businesses, and individuals for that matter, do not know is that there are numerous tax benefits for buying an electric car. From April 2020, the UK government announced a zero tax Benefit In Kind (BIK) for company car drivers and fleet operators who go electric. This benefit also includes hybrid vehicles with emissions from 1-50g/km and a pure electric range of over 130 miles. What’s more, the electric car tax on benefit in kind rate will increase to 1% in the 2021/2022 tax year, and then 2% in the 2022/2023 tax year.
As well as this, cars with zero CO2 emissions, or less than 50g/km (which means many hybrid cars are applicable) can qualify for 100% first year capital allowances, allowing businesses to deduct the full cost of the car or vehicle from pre-tax profits.
Road tax is also heavily decreased with electric cars, with vehicle road tax based on C02 emissions. Solely electric cars are exempt from the first year of road tax meaning it’s free to tax them. All cars registered between 1st March 2001 and 31st March 2017 which feature CO2 emissions less than 100 g/km, are not subject to road tax, however if your car is registered after the 1st April 2017 and cost over £40,000 you will need to pay an additional road tax even if it’s an electric vehicle. Electric cars which are applicable will need to pay £325 annually in road tax for the first five years, compared to £475 for petrol and diesel cars registered after April 2017.
Salary sacrifice is also possible if an employer provides an employee with an electric vehicle. The electric car salary sacrifice scheme is an agreement wherein employees of a company are given the option of buying the electric vehicle at a set monthly cost. This monthly payment is calculated using the employee’s gross salary. This means employees will be saving on National Insurance contributions as well as Income Tax.
Are There Any Government Schemes Which Incentivise Buying Electric Vehicles (EVs)?
Many are aware of the current government grants for buying a brand new electric vehicle, this is entitled the Plug-In Grant. This scheme provides a discount on the price of a brand new low-emission vehicle through a grant the government gives to vehicle dealerships and manufacturers. The maximum grant available for cars is £2,500. The amount of the grant depends on which category the vehicle is in. The 7 categories are cars, motorcycles, mopeds, small vans, large vans, taxis, and trucks. People who wish to enter this scheme won’t need to do anything, as vehicle manufacturer dealers will automatically include the value of the grant in the vehicle’s price.
As well as this, individuals can get up to £350 (including VAT) off the cost of installing a charger at home through the Electric Vehicle Homecharge Scheme (EVHS), which provides funding for up to 75% towards the cost of installing electric vehicle charging points at domestic properties across the UK. Electric car charging points are also covered under the Super Deduction Scheme, which enables companies to claim a reduction on their tax bill by 130% on ‘plant or machinery investments’.
When it comes to driving in central London, electric car users are exempt from the Congestion Charge which costs £11.50 per day per vehicle between 07:00 and 18:00, Monday to Friday.
Of course, it’s also worth stating that by choosing to go electric, there are no ongoing fuel costs to cater for. This also means that fuel duty tax is significantly decreased to just 5%, as opposed to the 20% for petrol and diesel vehicles.
Electric Charging Points At Nordens!
It gives us great pleasure to announce that we are installing electric charging points at our Nordens’ office. This means that staff, as well as clients, will have free access to electricity to charge their EVs. This is part of Nordens’ ongoing commitment to offset our carbon footprint and work with other SMEs through the SME Climate Commitment which we are proud to be a part of.
We hope this has outlined to you the benefits of switching to an electric vehicle and how it could transform your business. If you require any further information on electric vehicles and their financial benefits, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.