Now could be a good time for your company to invest in an electric car or van, as there are generous tax reliefs available.
A purely electric car qualifies for a 100% first year allowance (FYA) if it is acquired before 1 April 2025. This means that it is deductible fully in the period of purchase for tax purposes. The car must be new rather than second-hand, but ex-demonstrator cars count as new for these purposes.
You can also get a government grant of £2,500 deducted from the price of an electric car that costs less than £35,000. This covers around half the electric models on the market.
Your company can claim a 100% FYA for the cost of buying and installing electric vehicle charging points at its own premises.
The driver of the electric company car will be taxed on the benefit of using the vehicle for private journeys, but that benefit is only 1% of the vehicle’s list price for 2021/22. It rises to 2% next year but remains frozen at that level until April 2025. The driver can also apply for a government grant to fit an electric charging point at their home!
The company can pay the driver 4p per mile for any business journeys they take in the electric car, where the individual has paid for the electricity to charge it. This compares favourably with an average cost of 3.3p per mile when charging a car from a domestic supply.
Where the company pays for the electricity to charge the vehicle, there is no benefit-in-kind tax for the driver if they use that power on private journeys.
All commercial vehicles, such as vans, qualify for the Annual Investment Allowance (AIA), whatever their CO2 emissions, which gives the company a 100% deduction for purchases totalling up to £1 million per year made on or before 31 December 2021. From 1 January 2022 the AIA cap will reduce to £200,000 per year, but note that there are complicated transitional rules. The AIA is also available to unincorporated businesses.
For companies, such vehicles may qualify instead for tax relief at 130%, if purchased new before 1 April 2023, under the ‘super-deduction’ rules.
Drivers of electric vans have no tax charged on them for the benefit of using the vehicle for personal journeys.