Choosing to acquire a company car is a smart idea for any business owner. You can benefit from tax relief on the purchase of the vehicle, which saves you money when compared to purchasing the car privately. Business owners are increasingly selecting electric vehicles as their company cars now more than ever, making for a trendier, more sustainable choice. This is fantastic news for both your company’s finances and the environment.
The car benefit charge your company will pay on the vehicle largely depends on the CO2 emissions that the vehicle produces. In short, the lower the emissions, the less tax you will have to pay. The payable tax on the vehicle also depends on the list price of the car when it was new, even if the car is second hand, and what type of fuel the car uses.
To ensure you’re getting the most for your money, it’s a good idea to weigh the potential cost of paying for your own fuel against the tax payable on the car benefit. Furthermore, as a business owner you will need to take out Class 1A insurance which is 13.8% of the benefit itself. Hybrid vehicles will be taxed as if they were petrol powered vehicles, but will have less tax to pay due to their lower emission levels versus a purely fossil fuel powered vehicle.
Here is where electric cars really pull through. A purely electric company car will be subject to pay absolutely no car benefit charge for the 2021/22 tax year. In 2022/23 you’ll be paying just 1% of the tax and only 2% thereafter. When you compare this to the 27% car benefit tax of petrol cars over the same period you can really notice the difference. This means that by choosing an electric vehicle, you will be saving your company a small fortune that could be better invested elsewhere.
It’s not just the tax rates on electric vehicles that are low, their running costs are too. The price of charging your vehicle depends on where you decide to power up. Location charge points offer pay per session services which are occasionally provided for free. Even when you are paying for power, with electric, running costs are cheap. When we compare a Tesla 3 against a Lexus IS petrol hybrid, the Tesla is running at 4.8p per mile compared to 11.2p from the Lexus. Over a year, that adds up to some major savings. Let’s say you are averaging around 10,000 miles a year, with an electric vehicle there could be a saving of up to £640.
But it’s not all about finances, it’s about the environment too. Choosing electric vehicles for your company cars is the sustainable choice for the planet. The added environmental benefits can give you peace of mind that your morning commute won’t threaten the polar bears. This can also help fit into your company image, especially if you position yourself as an ethical brand. With all the great benefits that come from electric cars, it’s no wonder they’re becoming a popular choice for company vehicles.