Electric Cars: Reduce Your Tax & Your Carbon Footprint

Electric cars don't just help the environment; they can also prove a huge money-saving option. There are many monetary benefits of purchasing an electric car, all of which can add up to a considerable saving. Below is a brief summary of some of those benefits: UK Plug-in Car Grant In January 2011, the government introduced a grant to encourage motorists to purchase ultra-low emissions cars by offering a grant towards the cost of the vehicle, up to a maximum of £5,000. Qualifying cars can include, but are not limited to: Electric cars Plug-in hybrid cars Hydrogen fuelled cars



General tax benefits

Exempt from the congestion charge in London - once a £10 registration fee has been paid.
No road tax, providing the electricity comes from an external source or an electric storage battery not connected to any source of power when the vehicle is moving, i.e. petrol/electric hybrid vehicle.
No showroom or luxury vehicle tax

Corporation Tax Relief

Businesses of all sizes can claim 100% First Year Allowance (FYA) on capital expenditure on a car, provided that:
The car is 'unused and not second hand', and is registered on or after 17 April 2002.
It is an electric car or a car with CO2 emissions of not more than 75 g/km driven.
The expenditure is incurred between 17 April 2002 and 31 March 2016



Benefit in kind

Cars producing 0-50 g/km of CO2, such as electric cars, have an appropriate percentage of 0% (from 2010/11 to 2015/16). This effectively means that there is no car benefit charge or fuel benefit charge on company cars for an employee. Cars with up to 75 g/km of emissions will be taxed at 5% up to 2015/16.

Comparison of Company Cars for Tax Purposes

Tesla Electric Cars vs. Aston Martin

Scenario: A company wishes to purchase a new company car for the director. The company will also pay for the private fuel that the director uses. The company is comparing the tax consequences (for the tax year 2015/16) of purchasing an Aston Martin and a Tesla S Electric Car.

The list price of both cars is £100,000 and the company has taxable profits of £100,000. The director earns £150,000/year and does not make any contributions towards the cost of the car, and the company pays for the private fuel.



Tax consequences

Tax consequences for the company

When all the factors listed above are taken into consideration, the company can make a Corporation Tax saving of £18,750 by buying the Tesla S Electric Car over the Aston Martin. They will also end up retaining profit after paying for the car. On the other hand, the company can't actually afford to purchase the Aston Martin, as they would end up with debt. This will be due to all the taxes that are applicable. Employers Class 1A National Insurance Contributions (NICs) will also have to be paid for the Aston Martin.

Tax consequences for the director

By purchasing the Tesla S Electric Car over the Aston Martin, the director will make a personal tax saving of £18,233.