Electric Cars
Electric Cars
As more and more businesses consider more sustainable and eco-friendly ways to operate, we are seeing an increase in the acquisition of electric cars.
There are tax surrounding electric cars, and they are:
The company car that is available for an employee’s private use will usually attract a benefit in kind charge. As such, the benefit will be subject to income tax (for the employee) and Class 1A National Insurance Contributions (NICs) for the employer and these will be reported on the form P11d each year that the electric car is available to them.
The tax and NICs are based on a percentage of the official price of the car plus certain accessories, this percentage being primarily determined by the car’s CO2 emissions.
The benefit on the employee is then taxed at his or her appropriate personal tax rate.
For tax year 2022/23 to 2024/25 is 2% for these years
For cars with emissions below 50g CO2/km, the percentage will be based on the electric range of the vehicle and the registration date.
Car Fuel Charge
As electricity is not a fuel, there is currently no employee fuel benefit charge on electric cars, and thus no Class 1A NIC charge for the employer.
However, there are special issues relating to the recharging of the battery of an electric car.
If an employer provides a company electric car, they can pay for recharging the car without a benefit in kind. They can also pay for a charging point to be installed at an employee’s home, if the electricity is also paid for by the employer, without a benefit in kind arising.
Where an employee uses their own electric car for business and their battery is recharged from a charging point at work or from an employer-installed charging point at the employee’s home, then a taxable benefit will arise based on the cost to the employer.
Further advice should be sought on the specific circumstances if employers are looking to provide this to employees.
Mileage Allowances
The current Advisory Electricity Rate for fully electric cars is 4p per mile.
Therefore, if an employee provides the electricity and travels 1,000 business miles in their fully electric company car, they can make a mileage claim for £40 without any tax or NIC being due.
Where an employee uses their own electric car for business mileage, they can claim an Authorised Mileage Allowance, and, if the employer pays less than the published rate the employee may claim Mileage Allowance Relief.
Capital Allowances
New and unused cars with less than 50g/km of CO2 emissions, 100% first-year allowances are available.
Leased electric cars do not qualify for this allowance.
VAT
If you are using the electric car on business and you need to charge the battery, you will more than likely pay for this especially at charging point in major towns and cities.
If you must pay for this then it will include VAT so this can be claimed in the same way as any business expense.
Road Tax (Vehicle Excise Duty)
Electric cars will no longer be exempt from road tax (vehicle excise) duty from April 2025, this was announced in the 2022 Autumn Statement.
If you need help or want more information on electric cars, please contact us:
Call 07795 425032