Limited Companies and Electric Company Cars
For Limited Companies, we would say it is probably worth buying an electric company car:
- On new and unused zero emissions cars, the company can get 100% FYA (Capital Allowances) in the year of purchase.
- The Benefit in Kind to the employee or director is only 2% of the car value (fixed until April 2025), so on a £35K car that is £700 – and that is what ends up on a P11D and thus on the employee’s personal tax return. It is then taxed at the employee’s normal rate.
- The company pays class 1A Employers NI only on that 2% also. So on a £35K car, the company pays £101.71 for 2022-23 tax year.
Remember: The Benefit is based on the LIST PRICE of the car when new plus any accessories, and not on what you paid for it.
A company can also pay for the Insurance, the tax, the MOT, the servicing, and the repairs. These are not taxable benefits as the car belongs to the company.
If an employee (or director) is paying for the fuel used in a company car, then you should use the government’s fuel advisory rate to calculate how much to reimburse them (this can change every few weeks – it is currently 8p per mile for electric vehicles).
Remember: On a normal car, you should avoid the company paying for any personal fuel as that becomes a fixed benefit in kind even if it only for 1 tank of petrol in the year. It is always better to claim a mileage allowance.
If you are reimbursing yourself or an employee for company use of a private car, then the mileage allowance for all cars is 45p irrespective of how the car is powered.
Chargers: houses and bungalows no longer benefit from the grant for installing home chargers, but flats and rental properties can as long as you have your own parking space. The company can install EV charging equipment at your home (and claim any grant) with no taxable benefit as long as it is for a company car. Subject to the usual rules that the invoice must be addressed to the company and the company must have paid for it.
Sole Traders & Partnerships and Electric Company Cars
For Sole Traders and Partnerships, we would say it is probably worth buying an electric company car.
Your company can pay for a car, The FYA capital allowance remains the same, but the amount will need to be apportioned between business and personal use. Running costs also need to be apportioned, or claim the mileage allowance of 45p.
You can check if you need to pay tax for charging an employee’s electric car on the HMRC website.
Would you like to know more about buying a car through your sole-trader business? Read our blog: Can I Buy a Car Through my Sole Trader Business?
Please get in touch if you would like more information on buying an electric company car.