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Since April 2020 there has been a massive reduction in the car benefit rates for Ultra Low Emissions Vehicles (“ULEV”).  These are cars with CO2 emissions of <50g/km and an electric mileage range of 130+.

For example a BMW i3 (a fully electric car), with a list price of £33,340 and CO2 emission of 0g/km, you would have the following taxable benefit:

YEAR	BIK RATE	TAXABLE BENEFIT (LIST PRICE X BIK RATE)	TAX FOR HIGHER RATE TAX PAYER	CLASS 1A NATIONAL INSURANCE PAYABLE BY EMPLOYER
2021/22	1%	£333	£133	£46
2022/23 – 2024/25	2%	£667	£267	£100

Note the company can also cover the costs such as insurance, maintenance, installation of charge points without any additional BIK charge.

What are the other advantages of having a ULEV company car?

• Enhances Capital Allowances (ECAs) for ULEV company cars

If you are buying a brand new car outright or on hire purchase you could normally only claim written down allowances (WDA) at 18% (or 6% for cars with CO2 emissions over 50g/km) per year on the cost of a company car.  However 100% ECAs can be claimed on the cost of a fully electric car with no CO2 emissions meaning the entire cost of the car can be deducted from company profits before corporation tax is payable.

For the example above, purchasing the BMW i3 at £33,340, would save corporation tax of £6,335. Please bear in mind that when you sell the car a balancing charge based on the sales price is payable so over the life of the car you will get the relief  on the amount it has reduced in price by.

If your company taxable profits are likely to be over £250k from April 2023 and you are therefore going to be paying corporation tax at 25% then it may be worth considering just claiming the WDA at 18% so that when you sell the car you end up with a balancing allowance rather than a balancing charge at the higher tax rate.

• Car leases can be attractive

If instead you choose to lease the car you can offset the cost of the lease and claim 50% of the VAT back (if you are VAT registered) within your limited company.

• Grants are available

There are Government grants of up to £1,500 for most new cars with CO2 emission <50g/km (assuming a range of 70+miles) The grant is applied to the purchase price by the dealer.  There are grants available of up to £350 for a home charging point but for home owners (other than those in flats) this will stop after 31 March 2022. The Workplace Charging Scheme enables businesses to claim up to £350 per socket.

• Zero road tax and Congestion Charge

ULEVS qualify for zero road tax and are exempt from the London Congestion Charge.

• Expanding range of qualifying cars

These range from a Tesla or a BMW 18 to Audi E-tron Quattro or a VW e-Golf.

I’m interested, what should I do?

Once you have been car shopping and short-listed the cars and the deals that you are interested in, [get in touch] with us and we can let you know the corporation tax savings and the car benefit implications for your options.

If you have a company car then a P11d will need submitting for you as the employee and a P11d(b) for the employer. This needs to be filed with HMRC by 6 July following the end of each tax year. We charge £50 + VAT for this service.

JLA Accounting Limited takes every care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss for anyone acting from or refraining from acting as a result of this information can be accepted by JLA Accounting Limited.