Electric cars

As a general rule, company cars are not tax-efficient for single director companies. This is because the director suffers personal tax on the benefit in kind of having the car available. This personal tax often more than offsets any corporation tax savings. The value of this benefit is a percentage of the cost price of the car, no matter how much or how little it is used privately.

Electric cars are subject to the same rules but, because the government wishes to encourage greener driving. The current percentage applied to fully electric cars is 0%, meaning there is no taxable benefit in kind for the current year. This is set to rise by only 1% in each of the next two years, meaning the benefit will still be low. However, it is important to bear in mind that the high cost of many electric cars will make this more expensive.

The company can claim special first year capital allowances for a fully electric car, separate from the general annual investment allowance. This means that the company gets the full price of the car in the year it is bought. The company can also claim the full costs of running the car as deductible expenses, though there will be an additional benefit in kind on the fuel (charging) costs if the director does not reimburse the costs associated with private travel. There will be different considerations if the car is leased instead of purchased.

If you want to check if a potential purchase qualifies for the 0% rate, or just check the benefit in kind cost on any car, you can do so by entering the details here.