Going electric. Is it worth switching to an electric vehicle in your business?
It’s no secret that electric vehicles can provide business owners with a tax efficient transport option for their business.
Read on to discover the key tax benefits and grants that currently exist:
1) An extremely low benefit in kind (BIK) rate
For the year ending 5th April 2022, the Benefit in Kind (BIK) rate for electric vehicles is set at 1%. This therefore has a very low impact on an individual’s tax liability. Note, this rate is set to rise to 2% for the year ending 5th April 2023.
Compare that with a car that runs on petrol/diesel – the BIK rates range between 14% to 37% for the same tax years.
Example: A Tesla model 3 compared to a BMW 520i SE (based on approximate list prices as of September 2021).
Using the tax years ending April 2022 and 2023 as examples, a basic rate taxpayer would save £2,638 in the YE April 2022 and then £2,556 in the YE April 2023.
For a higher rate taxpayer, the savings are even more substantial with a saving of £5,276 in the YE April 2022 and £5,113 in the YE April 2023.
2) Plug-in Grant
For qualifying electric vehicles, grants of up to £2,500 are available – the grant is automatically deducted from price charged by the dealer at acquisition.
The grants vary depending on whether the vehicle is a car or a van (large or small) etc.
Eligibility criteria needs to be met to qualify for the Plug-in Grant.
3) Home Charging Grant
A 75% contribution is available for the charging point itself and the associated cost to install – note this grant is restricted to £350 (gross).
4) Business mileage
Approved mileage can be claimed for electric vehicles.
Overview:
There are clearly some generous tax advantages available when switching to an electric vehicle, not only from the low BIK rate but also from the Plug-in Grant (where criteria is met).
However, there are still practical concerns that exist with the battery life currently available as well as access to charging points.
Each individual/business owner considering a switch should speak with both their accountant and a trusted/reliable car dealer.
If you would like to discuss any of the subject matter contained in this article or would like a general chat about your tax and accounting affairs, then contact us today at help@northhillfinance.com or call us on 033 3303 0988.