Should I buy an electric car?

3 min read

The electric car market is growing quickly, with almost 265,000 models on UK roads (December 2019). If you are thinking of making a change to your car, you now have more choice than you would have last time you went car shopping. Options such as petrol and diesel have been expanded to include hybrid and electric cars too.

The growth of electric cars

Most of the car manufacturers are prioritising a move towards electric cars. They have either an electric or hybrid version available in their range of cars for sale. If you are considering an electric car we give you guidance below.

Consider an electric car if…

 You drive less than 150 miles per day
 You have a garage or driveway
 You’re a company car driver
 You drive in central London
 You want to do your bit for the environment

Electric cars aren’t so good for…

 Regular journeys of several hundred miles
 Daily on-street charging
 Cheap purchase prices
 Towing

Government subsidies available

Every zero-emission electric car still qualifies for a £3,500 grant from the government. New and used electric car owners also benefit from a grant towards a home charger, which can recharge batteries up to three times faster than a three-pin plug.

The Office for Low Emission Vehicles provides a grant of up to £500 for most charge points for electric and plug-in hybrid cars, reducing the cost of some units to little more than £200.

Scottish electric car owners also qualify of a grant of up to £300 from the Energy Saving Trust, so many will find that their charger is free. 

Tax on electric company cars

The benefit in kind rates for company cars has meant that the popularity of company cars has dwindled over the last two decades. This could be about to change now that reduced rates are being introduced for 100% electric cars from 6th April 2020 meaning that the benefit in kind charge is negligible.

In 2019/20 the annual taxable benefit in kind on 100% electric cars was based on 16% of the list price For electric cars registered from 6th April 2020, the benefit in kind is 0% of the list price for 2020/21, 1% for 2021/22 and 2% for 2022/23.

2020/21 BENEFIT IN KIND CHARGE FOR CARS REGISTERED AFTER 5 APRIL 2020

CO2 (g/km) Electric range (miles) 2020-21 rate (%) 2021-22 rate (%) 2022-23 rate (%)
1-50 >130 0 1 2
1-50 70-129 3 4 5
1-50 40-69 6 7 8
1-50 30-39 10 11 12
1-50 <30 12 13 14

Source ICAEW

  • The employer will be due to pay class1 A NIC which is set at 13.8% of the benefit in kind (this is tax deductible).
  • The employer can also claim tax relief for the costs of insurance and maintenance.
  • In addition to the above, the employer can also provide charging facilities at the company premises free of charge which will be a tax free benefit for employees.

Capital Allowances

A further attractive tax relief for the employer is that, if the car is purchased rather than leased, they can offset the entire cost of an electric vehicle against corporation tax in the year of purchase.

HMRC has shared a handy tool calculator to work out the estimated cost of the vehicle to both the employer and the employee.

Business Mileage Payments

If charging facilities are not available at their workplace an employees can be paid a tax free mileage rate of 4p per mile.

How we can help

If you would like help with deciding whether to buy an electric car, the team at Loucas can assist you. Do contact us if you would like any further help or advice in this area.

For more advice, read our article on Buy, HP or lease.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

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