This article does not cover the risks of owning an electric car, depreciation rates etc. Instead, it discusses the tax implications if you buy an electric car for business purposes.
As electric cars have zero carbon emissions for tax purposes it should be possible to claim what is called a “first-year allowance” when the car is purchased from new. Effectively, this means that you can write-off up to 100% of the cost of the car against your business profits in the year that you buy the vehicle.
This allowance is only available for new vehicle purchases. If you buy a used electric car for business, you can only claim a “main rate” writing down allowance of 18%.
Additionally, self-employed traders will need to reduce their claim for either of these allowances if there is any private use of the vehicle.
When the car is sold, if you have claimed the 100% first-year allowance then all of the proceeds of the sale will be taxable as a balancing charge. The balancing charge will be reduced if there is any private use.
If you have the use of an electric company car, it will still attract a car benefit charge for the driver and a National Insurance charge for the employer, albeit at the lowest rates.
The ability to be able to write-off the cost of a car in the year of purchase is appealing as this boosts the initial cash-flow benefits of going-electric.
And, of course, there are environmental considerations…
If you would like to discuss this article in more depth, please contact DSC Accountants in Skipton on 01756 691065, Harrogate on 01423 560547 or Leeds on 0113 243 3559.