Electric Company Cars…worth it?

From 6th April company car owners will no longer have a benefit-in-kind on fully-electric vehicles, which is likely to make company cars far more appealing to motorists throughout 2020.

The benefit-in-kind on these cars at the moment is 16% of the list price, however this rate will drop from the 6th April 2020 to 0%. It will then only be 1% and 2% respectively for the two tax years following.

Tesla Model S

Take the Tesla S for example, a five door all-electric car, with an EPA range of 373 miles making it the second most-sold electric car in history.
The taxable benefit would come to £12,800 with the current benefit-in-kind rate of 16%. This would mean a higher rate tax payer (45%) would have to pay £5,760 in tax for that year. In addition to that, the company would have to pay Class 1A national insurance of £1,766.

However…

Under the new rate of 0%, the taxable benefit would be nothing, meaning a higher-rate tax payer would have no tax or national insurance to pay for the year.
With the rate of 1% in 2021/2022, there would only be £360 to pay in tax, and £720 the year after with the rate at 2%.

The company would also benefit from the new rates, as they will get full tax relief on the capital cost of the car, regardless of whether it was acquired through contract purchase or not. This means that at 19%, the ‘real’ cost to the company would be reduced to £64,800, down £15,200 on its current list price of £80,000.

When looking at the example above, shareholders who are looking to purchase an electric car would benefit in putting the putting the investment through the company. They would have to pay next to no tax in respect of benefit-in-kind and the company itself can enjoy full tax relief on the cost of the car. Tax efficient opportunities may also arise for personally held cars to be transferred to a company.

It is believed the new tax rules could see a swing back to company cars, although there will always be the threat of advances in technology making today’s model obsolete.

Contact us

If you’d like some advice on company cars and the impact they could have on your business, call us on 01254 583515 or fill out the form below.

Egan Roberts joins national network of Handpicked Accountants

We are delighted to announce that we have been selected to join the UK’s most reputable firms on the Handpicked Accountants website.

As a leading accountancy firm in Ribchester, Lancashire, we have been recognised for our personalised customer service and specialist knowledge of the industry. Established in 1986, our team of chartered accountants and business advisors have developed our services over the years to embrace technology.

We specialise in delivering our services to start-ups, academies, medical professionals, manufacturing businesses and SMEs.

As a registered auditor, we also carry out audits for a number of businesses across the country.

Our services include bookkeeping, VAT returns, tax planning, tax returns, payroll and accounts management using cloud based software, Xero.

The team at Handpicked Accountants choose only the strongest performing accountancy firms to participate in their network. Handpicked Accountants features specialist firms which have been tested for reliability and knowledge, filtered down to location to make the online customer journey more efficient.

As a provider of Xero accounting software, we can ensure that you have 24/7 access to your accounts from any device. The shared dashboard will also mean that you will be able to view the same financial data as your accountant. Xero is compatible with Making Tax Digital so you are able to complete VAT returns and submit other financial documents directly to HMRC.

David Tattersall, Head of Client Relations at Handpicked Accountants, said: “After careful consideration, we are really excited to announce that Egan Roberts is now part of the Handpicked Accountants family. The team have years of experience dealing with small business owners, so you can be reassured that the Ribchester based business can be depended upon.
“We aim to simplify the process to source a local accountant which fits the bill in terms of trust, reliability and high service standards. The Handpicked Accountants website makes it easy to filter for accountants in your local vicinity, helping you take control of your financial affairs.”

Our profile can now be viewed on the Handpicked Accountants website.

If you would like more information about our services, an initial meeting and quotation free of charge with no obligation then call us on 01254 583515, email accounts@egan.co.uk or complete the form below.