Could it be time to think about swapping your company Merc for a Tesla, and your white delivery van for a climate-friendly green one?
I agree with Bal about electric vehicles: they keep getting better, more convenient and, let’s face it, are a lot cooler now than they were a decade ago. That’s why we’re going to keep banging this drum.
Most electric vans can now travel more than a hundred miles on a single charge – easily enough to get from Sittingbourne to Eastbourne and probably back again.
More importantly, they also come with some nice tax breaks.
From April 2020, for example, there’s zero tax on ‘benefit in kind’ on electric vehicles, and some hybrids, during 2020/21. That means you can supply a car or van to an employee – including yourself if you operate a limited company – without paying tax on this ‘perk’.
The Government has done this because it wants to encourage more people to choose electric vehicles. The more people drive them, the better the infrastructure gets – more charging stations and so on. It also becomes more likely that others will switch, too – keeping up with the Joneses! And the more they sell, the more affordable these vehicles become.
In 2021/22, that benefit-in-kind tax rate will increase to 1% and it will go up to 2% in 2022/23. That’s still way less than you’d pay on a similar diesel van, though – you’ll probably be looking at, say, £300 tax for the year compared to three-and-a-half grand.
There’s also a 100% first-year capital allowance discount for cars with CO2 emissions of less than 50g/km. That means that you can deduct the full cost of buying an electric car from pre-tax profits. On a car costing around £28,000 that means a tax relief of around £5,000 in the first year.
It gets better again, though: you can also get a sizable upfront discount on the price of brand new electric vehicles via a government grant. You don’t even need to do anything – the grant is processed by the dealer you buy from and will be reflected in the price of the van at point of sale. It covers 20% of the purchase price, up to a maximum of £8,000.
Finally, one last little perk: many low-emission cars and vans qualify for a 100% discount on the central London congestion charge – very handy if your work frequently takes you into town from Kent or Sussex.
On balance, even if electric vehicles are still a bit pricier than diesel or petrol equivalents, for many of our clients in retail and hospitality, it’s probably well worth making the change.
The fact that it’s also good for the planet our kids will all be inheriting is a nice little cherry on top.
Talk to us today for smart advice on identifying tax breaks for your business.