In recent times, running petrol or diesel company cars has become increasingly expensive for the family business. With electric vehicle (EV) technology being embraced by all the main manufacturers together with the government encouraging the purchase of EVs with attractive corporation tax relief and low Benefits in Kind (BiK), now could be the right time to consider a switch.
Previously, as well as overcoming some of the practical challenges, there have been valid concerns over the resale value due to uncertain battery life and quickly outdated technology. But, as maximum ranges and performances improve alongside government incentives, the adoption of EV technology for a family business is worth considering.
The larger purchase cost and lack of choice of models available are no longer overriding issues. All mainstream manufacturers provide EV options with ever improving refinement, maximum range, and performance.
As well as technology improvements continuing to drive down the purchase price of EVs, until at least April 2025 there is also a real financial incentive. In the first year, the total cost of a new EV is 100% deductible against company profits for corporation tax purposes, lowering the overall bill by 19% for a family company that has taxable profits. This is due to a rise from 2023 to 25%, therefore the financial saving is an attractive feature.
Despite BiK increasing on electric cars from 1% in the current tax year to 2% in the next, with perhaps further increases later down the line, this still remains significantly less than BiK for traditionally powered vehicles.
Acquiring a new EV through a family company means that the cost of a value write down is carried by the company rather than the individual. Therefore, purchasing a new EV for use by a family member, through the family company, could prove to be a smart financial move.
Running an electric vehicle doesn’t magically remove all running costs. Vehicles driving higher mileage are capable of running up sizeable energy bills. Still, you can expect considerable cost per mile savings compared to petrol and diesel cars and there’s good news on the depreciation and lease cost front too.
Against the running costs and tax savings, you should carefully consider the real-world practicalities of range limits and recharging. If you are interested in converting, please talk to your usual Crowe advisor.
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