World EV Day: Are you ready to switch to Electric?

On World EV Day™️ we explore the options for you if you're considering getting an electric company car or looking at setting up an electric vehicle salary sacrifice scheme for your team.

Let's take a look!

Business Contract Hire (BCH). One of the most popular ways to get an electric vehicle. If you don't pay yourself a monthly salary through your Company, BCH is a great way to get an electric vehicle if you want to replace the vehicle every 3 or 4 years. For Businesses it may also be Vat and tax efficient.

Business Contract Purchase or Hire Purchase: If you buy an electric car through your Business, you may be able to offset part of the cost against your corporation tax bill.

Tax relief is obtained through Capital Allowances which have specific rules as to how much can be claimed. With most cars this deduction will be applied gradually over time, however, for new and unused electric cars where CO2 emissions are 0g/km, they have a first-year capital allowance of 100%. This means the company can offset the full cost against its taxable profits in the year of purchase, creating a corporation tax saving.

If you were to buy a car personally (rather than through your business) you will have to use cash that has already been subject to corporation tax and income tax.

Vehicle Salary Sacrifice Schemes. These schemes have been well publicised, it's a colleague benefit scheme which enables your team to acquire a brand-new company car through Salary Sacrifice.

Your employees save money by exchanging part of their annual salary for the car and the added services before it is taxed. This reduces the amount of tax and national insurance they pay on the remainder of their salary.

If you have colleagues who receive a cash allowance for a company car, all of the allowance can go towards paying for the vehicle. If a cash allowance is spent on a private finance arrangement, it will be subject to income tax and NI deductions which means there is much less to spend.

Employers will also pay less National Insurance and can decide to retain these savings or pass them on through the scheme.

As these vehicles are classed as a 'Company Car’ (Benefit in Kind) employees must pay company car tax at the prevailing rate for the vehicle (via an amended tax code). However, this is often much less than the savings you will make in income tax and NI, especially if you choose a zero CO2 emission car which attracts a rate of only 2% Benefit in Kind.

If you're interested in finding out more, please contact us on 01298 38 30 30 or email us at hello@harmoto.co.uk and we will be delighted to help.