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Are electric cars for directors of limited companies worth it?

Time to go electric? 

Company cars have historically been deeply unfashionable. Before electric cars, most company directors and employees found that they were better off buying a car personally and then claiming the associated expenses.

Concern for the environment was the reason why a more punitive tax regime was introduced. Tax was tethered to the value of the car and its CO2 emissions.

However, with car manufacturers introducing more varieties of electric vehicle, at different price-points, could the trend be turning full-circle?

Improvements in electric vehicles (EVs) has reignited the debate on company cars, and whilst there are tax changes for 2025-26, an electric company car may be a great solution.

New tax legislation for electric company cars in 2025-26:

  • Benefit-in-Kind (BIK) tax for pure electric vehicles remains highly favourable. In 2025-26, drivers of pure electric company cars will benefit from a very modest 3% BIK tax rate
  • Hybrid vehicles with CO2 emissions between 1-50g/km and an electric range of over 70-129 miles will see a 6% BIK rate for 2025/26. This could be an interesting option for those company car drivers who do not wish to completely walk-away from either petrol or diesel.
  • For other hybrid vehicles the BIK tax rates vary depending on their specific emission levels and electric ranges.
  • For 2026, the BIK rates for pure electric vehicles will rise incrementally by 1% each year, reaching 5% in 2027/28. Hybrid vehicles will also see a similar increase in BIK rates. Despite these increases, electric & hybrid vehicles will remain a highly tax-efficient choice compared to their petrol or diesel counterparts.
  • Road tax is to be payable on electric & hybrid vehicles from 2025 onwards. Whilst rates are still to be confirmed they will be from £190 per annum.
  • Charging infrastructure. 100% first-year capital allowances for installing charging points is available until 2025, although this tax relief may be extended. This makes it easier for companies to support their employees’ shift to electric driving.

Renaissance of the company car?

With these tax advantages in place a continued rise in the demand for electric & hybrid vehicles in the business world is likely. More socially responsible fleet managers may see this as an opportunity to electrify their fleets, contributing to their sustainability goals while taking advantage of significant tax savings.

As the UK accelerates its shift towards electric mobility, with more charging points being installed across the country and continued improvements in the range and affordability of electric vehicles, we could see a true renaissance of the company car.

For a review of your company car tax status or that of your existing fleet, call us on (0161) 980 8788 or email murray@alexanderknightaccountants.co.uk 

 

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Electric cars continue to boom for directors

Download our electric car tax guide for entrepreneurs and business owners.

Demand for electric cars amongst our business owner client base continues to rise as prices fall. This drop in price on lease deals and RRPs for electric cars coupled with tax breaks means many company directors are going electric.

Company car owners paid a zero benefit-in-kind on certain fully-electric vehicles in 2020-21, compared to as much as 37 percent on vehicles with high CO2 emissions. For the tax year 2021-22 the benefit-in-kind on fully electric vehicles will be just 1% (of the vehicle’s list price, with accessories).

As a result of this premium electric vehicles could save business owners £1000s – compared to traditional vehicles.

You can download our free company car tax guide here to see how much you can save.

The launch of luxury models such as the Mercedes-Benz EQC, Audi E-Tron, together with Porsche and Range Rover hybrid vehicles follow the success of the Tesla Model 3 which is already considered to be a cult company car for British sales executives

Company cars have been deeply unfashionable for more than a decade now. In that time, most business owners have understood that they were better off buying a car personally and then claiming the associated expenses.

 One client of ours saw more than £10,000 knocked off his tax bill because he plumped for the Range Rover hybrid model over the diesel version.

With more e-charging points being installed across the country, improvements to the range of electric engines and a steady fall in the price we are predicting a renaissance of the company car.

If you need advice on the most tax efficient way to procure an electric car speak to our tax team on 0161 980 8788.

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Electric Car Tax Service by Alexander Knight & Co Accountants

electric car tax guide accountants uk

Rising demand for electric cars amongst our business owner client base – coupled with new tax breaks means we launched the UK’s first dedicated electric car tax accountancy service – back in 2020.

Now, in 2023, our electric car service is popular as increasing numbers of our clients enjoy the generous tax breaks offered to company owners who use electric vehicles on the road.

Electric company car owners will pay hardly any benefit-in-kind on certain fully-electric vehicles, compared to as much as 37 percent on vehicles with high CO2 emissions.

Electric Car Tax Savings

As a result of this, premium electric vehicles could save business owners £1000s – compared to traditional vehicles.

Luxury models such as the Mercedes-Benz EQC, Audi E-Tron, together with Porsche and Range Rover variants follow the success of the Tesla Model 3 which is already considered to be a cult company car for British sales executives

Company cars have been deeply unfashionable for more than a decade now. In that time, most business owners have understood that they were better off buying a car personally and then claiming the associated expenses.

Electric cars are a game changer for the humble company car. The new tax breaks laid out by the Government have reversed this trend and we predict there will be an upward swing in demand for electric vehicles, not least from business owners but also socially responsible fleet managers in the business world.

murray patt electric car tax accountant

Murray Patt of Alexander Knight & Co charges up his own electric car.

Huge tax savings

One client of ours saw more than £10,000 knocked off his tax bill because he plumped for the Range Rover hybrid model over the diesel version.

With these tax breaks about to kick in, more e-charging points being installed across the country, improvements to the range of electric engines and a steady fall in the price we are predicting a renaissance of the company car.

Get your FREE electric car tax guide here.

Download our electric car tax guide for entrepreneurs and business owners.

Download our FREE electric car tax guide for entrepreneurs and business owners.

Watch our video about electric car tax breaks for company directors:

If you are a business owner and you want to get a tax-free electric car – speak to us first and we will help you. Call us on 0161 980 8788 or email cars@alexanderknightaccountants.co.uk  

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