If you are a company owner and director and you are looking to change to an electric car in the next few years, then it might be worth waiting until 2020/21 and get your company to purchase the car.
At the moment the company can claim the full 100% of the cost of an environmentally friendly car (emitting less than 50g/km of CO2) as a taxable expense in the company. However, you get hit through personal tax as this would be charged to you as a benefit in kind (i.e., not included in salary).
This currently sits at 13% of list price and will be increasing to 16% in 2019/20. That means if the company purchases a £50,000 electric vehicle at the start of 2019/20, then you will be assessed to have received a benefit of £8,000 in that tax year. The taxable benefit in kind for you is the £8,000.
If you wait just one year, to 2020/21, to buy the same car, then the charge for electric cars could go down to as much as 2% of list price. Provided the electric car meets the thresholds then you will be taxed only on £1,000 instead of the £8,000 the year before. If the benefit in kind rates remain the same in the years after, then you could be paying as little as £200 tax a year.
If you have a company car, working out a benefit in kind charge makes the UK’s murky tax system even more opaque, so you really should get in touch with an accountant who’ll be happy to deal with it for you. One who likes tax.
Find your local AIMS Accountant today.