Can my company buy me an electric car to use personally?
When your employer provides you with an asset that you can use personally instead of paying you additional salary, there is usually a tax for doing so. That is no different when the company provides you with a car that you can use for private journeys.
If your company provides you with a traditionally fuelled car for personal use, it can be a very expensive way to fund your vehicle. Find out why I don’t usually advise buying a traditional car for personal use by reading my previous blog on company cars.
However, if your company provides you with an electric car that you can use personally, the tax tends to be substantially lower than for traditional vehicles and there are incentives for the company as well.
What are the tax implications for the company?
What happens in the company tax return if my company uses a loan or HP to buy an electric company car?
If your company either buys or chooses Hire Purchase as a way to invest in your electric car, a 100% first year allowance is available on a new or ex-demonstrator electric car. This means that the full cost of the vehicle can be used to reduce your corporation tax bill in the year in which you purchase the car.
Even if you invest in a second hand electric car, you can claim the capital allowances at the main rate of 18% rather than the special lower rate of 6% for most traditional vehicles.
VAT is not recoverable on the purchase of any car, electric or traditionally fuelled.
What happens in the company tax return if my company leases an electric company car?
When you lease a vehicle, you never own it so there are no capital allowances available in the company. Instead, the company can deduct the full cost to the company over the course of lease, either by charging the actual costs per year for an operating lease or through depreciation and interest for assets held under a finance lease. Note that if you lease a traditional car with emissions >50g CO2 per km then the company can only claim 85% of the cost as a deduction for corporation tax purposes.
If your company is VAT registered then half of the VAT incurred on leasing the electric car is recoverable through your VAT returns.
Can my company pay for charging my electric company car?
The company can also pay for the installation of an electric charging point for you as an employee without triggering a benefit in kind charge.
If you charge the vehicle at home and pay for the electricity yourself you can reclaim the cost from your company if you are able to distinguish the cost of charging your vehicle from your other household electricity charges. Otherwise you would need to stick to the approved mileage rates from HMRC of 8p per mile from 1 June 2024 (this is updated quarterly, find the latest rate here).
If you want to find out more about how much it costs to charge your electric car at home, the team at GoCompare have built an interactive cost of charging calculator tool, which you can access here.
Remember that the company can also pay for the maintenance and insurance of the company car.
What are the tax implications in my personal tax return?
What tax do I need to pay on the company car?
There is income tax to pay for the employee that gets to enjoy the use of the electric car. This income tax is much lower than it would be if you were provided with a petrol or diesel car personally. The tax on the benefit is set to increase from 2% in 2024/25 by 1% over the next few tax years to 5% in 2027/28 but the income tax you will pay remains at a low level for the value of the benefit provided. It is important to remember that these percentages are applied to the list price of the car, which is the price listed by the manufacturer when new. This may be higher than the price you paid for it.
Don’t forget that tax law can change at any time. Investing in an electric company car may be a good idea just now but be prepared that that may not always be the case.
What is it like to drive an electric car?
From a personal perspective, I started driving an electric car in early 2021 and it has been a favourable experience. If you’ve never driven an electric car before, you’ll find that you don’t lose anything in the feel of the car. In fact, I find it more responsive than a petrol car.
The one thing that people worry about is range anxiety and for longer journeys that is an issue. My car only has a small battery and takes about an hour to recharge if I am able to locate and use a rapid charger. That said, the car I have is not really intended for longer journeys and I only bought it for short range journeys so it has not been a problem for me. If you needed the vehicle to cover longer distances, you would need to invest in a car with a longer battery range and a rapid charge facility. There are plenty of these on the market now and charging facilities are constantly improving.
I think if you are a company owner and you had already been thinking about investing in an electric car then it is a good idea to do so through your company. However, think first about whether you want an electric car. It's not worth switching to an electric car for the sake of it
