Are electric cars the way forward?

Simon Syddall

Conversations around sustainability and the environment are on the increase, and naturally, this has resulted in businesses considering their green credentials – particularly if they have a fleet of petrol or diesel company cars.

The car industry is expecting 2020 to be a breakthrough year for electric cars, with around 100,000 expected to be sold in the UK, but questions remain around their cost and their practicality on a day to day basis.

The current 16% benefit in kind charge to tax is not overly generous, but for 2020-21, a company car driver using a pure electric vehicle will have a 0% benefit in kind charge, which is projected to rise to 2% for 2022-23. Coupled with a 100% writing down allowance for capital allowances for vehicles emitting less than 50g/km of CO2, that might make electric cars more attractive to businesses from a tax perspective.

So, what is the reality? There were eleven pure electric models for sale new in the UK in December 2019, with a further ten coming to the market this year. Prices vary from £25,670 to up to £82,200 but potential buyers should take care to read the small print to work out whether the stated price is before or after the (current) £3,500 government incentive.

The more expensive ‘premium’ electric car models are certainly very well equipped, comfortable and fast accelerating. They are technically advanced and according to reviews, are more reliable than a fossil fuelled alternative.

Range is a key issue for businesses to consider. For the eleven on sale, ranges on full charge vary from just 67.7 to 379 miles. The average is 241 miles, which would just be enough to get you from Sleaford to London and back.

So, where do we go from here? There is a ‘halfway house’ in the form of the hybrid models. We have seen some significant benefit in kind tax savings for company car drivers of these models.

Only vehicles with CO2 g/km below 50 qualify for the 100% tax writing down allowance, with 51 to 110 being 18% and just 8% above 110, so they’re not as tax efficient as pure electric cars.

Before making the move towards electric cars, analyse any proposed purchase and establish the whole of life net (of tax) costs to enable accurate comparisons to be made. Factor in the ‘knowns’; the initial cost, insurance, road fund, repair and servicing and fuel/charging costs, finance costs, and factor in tax costs and reliefs.

There is no one size fits all, so it is worth getting that advice from tax experts before making a potentially expensive mistake. Get in touch today to find out more about the tax services we offer: https://duntop.co.uk/contact-us/