If you run a business and are thinking about getting a new car then this is the article for you!? Buying an electric car through your company is hands-down one of the smartest financial moves you can make. Not only does it save you money in tax breaks, but it’s also an eco-friendly way to keep your business on the cutting edge.
Let’s dive into why your next set of wheels should be electric, but most importantly owned by your business!
Tax perks that put money back in your pocket
The Government is on a mission to get more people driving electric, and they’re making it financially irresistible for businesses to jump on board.
- Capital allowances – Buy a brand-new electric car for your company, and you can claim 100% tax relief in the first year! That means if you purchase a £50,000 EV, you could save between £9,500 and £12,500 depending on your company’s tax rate. Compare that to a petrol car, which only gets 6% to 18% relief, and the difference is staggering.
- Charging point tax relief – Need a charging station at work? The cost of installing one is also 100% tax-deductible, yet another win!
Employee perks: Drive an EV for pennies!
Did you know your company can buy you an electric car for personal use, and you’ll barely pay any tax on it? Take a £38,900 EV, for example—if your company buys it, you could be taxed as little as £155.60 per year! That’s far cheaper than taking the equivalent amount in salary, which would be heavily taxed.
Just something to note is that from April 2025, the benefit-in-kind tax will rise slightly, going up by 1% each year until it reaches 5% in 2027/28 and 9% by 2029/30. That said though, even with the increase, it remains a huge financial advantage over petrol and diesel cars.
Free ‘fuel’? – Yes, please!
If your company owns your electric car, you get some amazing perks when it comes to charging:
- Charging at work? It is totally tax-free!
- Need a home charging station? Your company can pay for it without triggering a taxable benefit.
No more eye-watering petrol prices – just plug in and drive!
Grants & road tax savings
The Government also offers generous grants to help with the purchase of electric vehicles and charging stations. Plus, if you drive a zero-emission car, you pay zero road tax – unlike petrol cars, which could cost you an extra £335 a year if the list price is over £40,000. That’s even more money saved in the long run.
Should You buy, lease, or finance?
Before making the big decision, think about what works best for you:
- Buying outright – You get full capital allowances in the first year, meaning big tax savings upfront.
- Hire Purchase – Works like buying but spread over time, with interest tax-deductible.
- Operating Lease – Pay a set monthly fee and deduct the entire cost as a business expense.
- Finance Lease – More flexible but can affect tax differently based on how it’s structured.
Be like Danny!
Danny has a limited company and is eyeing a £50,000 electric car for personal use. Here’s what happens under two different scenarios:
- Option 1: Danny buys the car personally. He must take a £50,000 dividend, paying 33.75% tax on it – that’s a whopping £16,875 gone before he even touches the car!
- Option 2: His company buys the car. No dividend tax, between £9,500 to £12,500 in tax relief, and a tiny business in kind tax charge of £400 a year.
His total savings are £25,975 – That’s more than half the cost of the car covered just by being smart about how he buys it!
So, to summarise why wouldn’t you buy an electric car through your business?
The financial benefits of buying an electric car through your business are just too good to ignore. You get massive tax breaks, lower running costs, and help the environment – all while driving a sleek new vehicle.
If you’re still unsure or need help running the numbers, why not give us a call on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.
You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min
