This article does not cover the risks of owning an electric car, depreciation rates etc. Instead it discusses the tax implications if you buy an electric car for business purposes.
As electric cars have zero carbon emissions for tax purposes it should be possible to claim what is called a “first year allowance” when the car is purchased from new. Effectively, this means that you can write-off up to 100% of the cost of the car against your business profits in the year that you buy the vehicle.
This allowance is only available for new vehicle purchases. If you buy a used electric car for business, you can only claim a “main rate” writing down allowance of 18%.
Additionally, self-employed traders will need to reduce their claim for either of these allowances if there is any private use of the vehicle.
When the car is sold, if you have claimed the 100% first year allowance then all of the proceeds of sale will be taxable as a balancing charge. The balancing charge will be reduced if there is any private use.
If you have the use of an electric company car, it will still attract a car benefit charge for the driver and a National Insurance charge for the employer, albeit at the lowest rates.
The ability to be able to write-off the cost of a car in the year of purchase is appealing as this boosts the initial cash-flow benefits of going-electric.
And, of course, there are environmental considerations…
- Deadline approaching for checking property details - February 2, 2023
- Tax Diary February/March 2023 - January 31, 2023
- PAYE and overseas employees 24773 - January 31, 2023
- When you must register for VAT - January 31, 2023
- Limits to tax relief for pension contributions - January 31, 2023
- Corporation tax changes April 2023 - January 31, 2023
- Do not get caught out by dodgy job ads - January 31, 2023
- Electric car owners to save money under landmark initiative - January 26, 2023