Electric Cars- is it time for your business to invest?

There has potentially never been a better time to introduce electric company cars to your business. The government has recently announced a range of measures in order to encourage more businesses to use electric vehicles. This is ahead of 2030 – the date when the sale of new petrol and diesel cars is expected to end in the UK. So, as the UK Government continues to improve the availability and affordability, is it time for your business to go electric?

What are the new measures?

Several measures have recently been put in place to incentivise electric company cars. For example, there is now a requirement for new homes and workplaces to have electric vehicle charge points included from this year. Not knowing where they can charge their car has made it impractical for many businesses. By introducing more ways to charge vehicles with a simple way to pay, we could start to suddenly see a huge increase in electric car usage.

What are the new incentives and tax benefits of Electric Company Cars?

There is now a range of incentives that are aimed to benefit both the employer and the employee. These incentives could make the prospect of electric company cars much more attractive.

Employee benefits

As electricity is not classed as a road fuel, ultra-low emission vehicles have vehicles that have no fuel benefit charge. This allows employees to not pay Benefit in kind on any electricity their employer provides to charge the car.

As electric vehicles have fewer moving parts that are susceptible to damage and wear and tear, maintenance requirements are often significantly lower; making them less costly. A great benefit of electric company cars to the employee and employer alike.

Company Tax Relief

Cars that have CO2 emissions that are less than 50g/km are now eligible for 100% first-year capital allowances. This allows companies to deduct the full cost of the electric vehicles from their pre-tax profits. This can make a significant impact on the final tax they pay and is an extremely generous allowance when compares to the 18% annual allowance for cars that emit 50-110g/km and the 6% for cars that emit over 100g/km.

Benefit in Kind and National Insurance

For a completely electric vehicle, the benefit in kind rate for the 2021/22 tax year is 1%. However, this is rising to 2% in the 2022/23 tax year. This is compared to up to 37% charged on the least CO2 efficient vehicles.

As with the Benefit in kind tax, employers’ Class 1 A National Insurance contributions are also linked to the car’s CO2 emissions as well as the purchase cost (P11D value). Therefore, employers that are offering staff brand new electric cars at a reduced rate can benefit from reduced NI contributions themselves.

Congestion Charge and Road Tax

In addition to this, electric cars are currently exempt from having to pay either the London Congestion Charge or road tax until April 2024.

Grants

There are also grants available (known as Plug-In Car Grant- PICG) that businesses should be aware of. For vehicles that meet specific qualifying criteria, the Government will contribute up to £2,500 towards the price of the car.

Whilst used cars, hybrids and more expensive pure electric cars over £35,000 are not eligible, popular models such as the Nissan Leaf, Renault Zoe, and Peugeot e-208 all are applicable for the £2,500 grant.

It is not only cars that are eligible for grants which businesses need to be aware of. Electric motorbikes or mopeds can be eligible for £1500 grants whilst electric vans can receive a grant of up to £6000 depending on the type.

The amount of the electric car grant has fallen steadily since it was first introduced in 2011. It used to be a £5000 cap and up to 35% of the car cost, the grants are still a decent size and can save businesses a substantial amount of money. Another great benefit is that the grant payments are claimed directly from the dealer who sells qualifying cars, meaning the business itself doesn’t need to do anything additional.

Whilst the incentives discussed in this article are the most attractive they have ever been, there is no guarantee that they will continue to be around for the long term. So if your business is already thinking about getting electric cars for company use, now may be the time to turn it into reality to make sure you can get the level of help you are entitled to. No matter whether these exact rates are here to stay, what can be safe to say is that the rates will continue to be lower than petrol or diesel cars.

The government also has an incentive towards the cost of home charging points which can be for new or used as well as plug-in hybrid cars. These grants are worth up to 75% of the cost to get a wall box installed and currently has a cap of £350.

Why should businesses go electric?

Not only do these incentives help your business save money, but company cars are also great incentives to help retain key members of staff as well as help your business as a whole reduce its CO2 emissions. Previously electric cars were out of reach for many companies, however, with more cars now being available as well as these Government schemes, it has never been more affordable or accessible for companies to go electric and reap the benefits.

If you want to know more about how to invest in electric company cars and how to do this in the most tax and cost-efficient way, then please get in touch with a member of the Wright Vigar team. Our specialist team are here to help if you need any further details regarding using electric cars in your business.