Leasing a new electric car through a UK company offers significant tax advantages. The primary benefit is that companies can claim the full cost of the lease payments against their pre-tax profits, which can lower the total amount of corporation tax they owe.
Additionally, electric cars benefit from a lower Benefit-in-Kind (BIK) tax rate compared to petrol or diesel vehicles. This makes it cheaper for employees to use these cars as company vehicles. Moreover, electric vehicles are often exempt from road tax.
The typical benefits in changing to an electric car are:
Corporation Tax Relief: The lease payments can be deducted from the company’s profits, reducing the overall corporation tax.
Benefit-in-Kind (BIK) Tax: Electric cars have much lower Benefit in Kind rates compared to conventional cars. This means employees pay less tax on the use of a company car. The current Benefit in Kind rate is 2% for the 24/25 and 25/26 tax years.
VAT Recovery: Companies can reclaim 50% of the VAT on the lease payments if the car is used for both business and personal purposes, and 100% if used exclusively for business.
Other Incentives: Electric cars are exempt from road tax and eligible for other government incentives aimed at promoting cleaner transport options.
Swapping out Dividends: Swapping out your dividends for an Electric car may mean further tax saving on your personal income tax.
These benefits make electric cars financially appealing options for businesses looking to reduce tax liabilities and support environmental sustainability.
If you wish to discuss purchasing an Electric car through your business then please get in touch.