1) Electric Cars
The push towards electric vehicles (EVs) in the UK is supported by several tax incentives aimed at both individual owners and businesses (must be a brand new car).
For individuals, one of the primary benefits comes in the form of reduced Benefit in Kind (BiK) rates for company car drivers choosing electric vehicles. The BiK rate for electric cars is significantly lower compared to combustion engine vehicles, making EVs an attractive option for company car users. The current Benefit in Kind rate is 2% until April 2025 the will rise to 3%.
For anyone swapping an electric car for higher rate dividends then this will save on the higher dividend tax as well!
Additionally, there’s no Vehicle Excise Duty (VED) for electric vehicles, and they’re also exempt from the London Congestion Charge, provided they are registered for the Cleaner Vehicle Discount.
For businesses, the advantages of investing in electric vehicles are also compelling. Companies can claim 100% first-year capital allowances for new electric cars.
This means a business can deduct the full cost of an electric car from its pre-tax profits in the year of purchase.
Furthermore, installing electric vehicle charging points at workplaces offers additional tax benefits, including capital allowances for the installation costs.
If you are a VAT registered business there may be further benefits of VAT relief.
Please let us know if you wish to discuss purchasing an electric car.
2) Pensions
Pensions remain one of the most tax-efficient ways to save for retirement in the UK.
Contributions into a pension scheme are eligible for tax relief at the individual’s highest rate of income tax.
This essentially means that for every £80 paid into a pension, the government adds an additional £20 for basic rate taxpayers, with higher and additional rate taxpayers able to claim further relief through their tax returns.
For employers, contributions made into employee pension schemes are not treated as a benefit in kind, and therefore are not subject to National Insurance contributions. These contributions are also deductible as a business expense, helping to reduce the corporation tax liability.
Please let us know if you wish to speak with one of our business partners for your pension needs.
3) Relevant Life Insurance
Relevant Life Insurance is a type of life insurance policy available to employers to provide an individual death in service benefit for an employee (directors are employees as well).
It is a way to offer a tax-efficient life insurance policy, where the premiums are paid by the employer but are not treated as a benefit in kind. This means the employee does not pay tax on the premiums as if it were additional income.
The premiums are usually deductible as a business expense for the employer, potentially reducing the company’s corporation tax bill.
Additionally, the benefit paid out in the event of the employee’s death is usually free from income tax and inheritance tax, provided it is paid through a discretionary trust.
Please let us know if you wish to speak with one of our business partners for your pension needs.
The UK’s tax system offers various incentives to encourage the adoption of electric cars, savings for retirement through pensions, and provision of employee benefits like relevant life insurance.
These tax benefits not only support individuals in making more sustainable and financially prudent choices but also offer businesses opportunities to reduce their tax liabilities while supporting their employees’ welfare.
As always, it’s advisable for individuals and businesses to consult with financial advisors or tax professionals to fully understand how these benefits apply to their specific circumstances.