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Haydock Industrial Estate
Haydock
St. Helens
Merseyside
WA11 9UY
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Business owners will be interested to know if it's more tax-efficient for them to lease an electric vehicle through their own limited company, so here's an article outlining the important factors to take into account.
Due to the benefit in kind taxation system, which can frequently result in high personal tax bills, company cars have historically been quite tax inefficient. However, HMRC has significantly reduced the benefit in kind rates on electric cars, at least for the time being, making electric company cars a very appealing option.
There are two different types of leasing when it comes to accounting:
Contract Hire – where you are essentially renting the vehicle and return it to the leasing company at the end of the lease - the leasing company will continue to own the vehicle.
Finance lease – where you borrow money to buy the car but keep ownership of it (or rather, the business that owns it) from the moment you buy it
Since the majority of people who lease electric cars do so through an Contract Hire (also known as operating lease), we will concentrate on that. A finance lease (also known as hire purchase) is more complicated and brings up the various tax and accounting treatment when you buy a vehicle.
The advantage of an operating lease is that you don't have to worry about fixed assets, depreciation, or capital allowance – the monthly lease cost is simply treated as an operating cost of your business, just like costs of rent, software, etc. Your business will save corporation tax based on the total lease costs over the term of the lease.
If the car your Limited company gives you can be used for personal purposes, you will be taxed on any benefits in kind received. HMRC is more concerned with whether the car is available for personal use rather than if you actually use it.
The amount of National Insurance you will have to pay on the benefit in kind depends on the CO2 emissions of the car you choose and the list price of that car.
As an electric car has zero CO2 emissions, the Benefit In Kind value will be much lower and cost you a lot less in tax.
Contract Hiring your electric car is significantly better when it comes to VAT since, as long as the car is used for business purposes, you can reclaim 50% of the VAT that was charged on the leasing costs.
The advice is to only claim half of the VAT charged on the leasing fee unless the automobile is completely used for business and is not available for any private use, in which case you may potentially claim the full amount of VAT. However, this would be very difficult to show to HMRC.
For all-electric vehicles, Road Tax rates have been reduced to £0 until at least 2025. Plug-in hybrid electric vehicles have reduced VED rates (PHEVs).
The plug-in car grant offered by the government aims to encourage the use of electric vehicles in the UK. The plug-in car grant is available at the time of purchasing and is frequently offered as a discount off the purchase price of a car.
The car must have an electric range of at least 70 miles. If a plug-in hybrid, the car must also have combined CO2 emissions of 50g/km or below. As a result, not many plug-in electric vehicles qualify but all the main full battery electric vehicles do.
Leasing Pro offers a variety of options if you're thinking about leasing an electric vehicle for your company. Browse our electric car lease deals from top manufacturers like Tesla, Mercedes, Vauxhall, and more.
We're here to help! Contact our staff today to discuss you requirements!
Leasing Pro
Haydock Lane
Haydock Industrial Estate
Haydock
St. Helens
Merseyside
WA11 9UY