Driving down costs and emissions
Posted on 8th June 2022 at 12:10
There’s a big drive from the government and some local councils for electric vehicles (EVs) to help reduce carbon emissions and to assist with clean air zones. But with fuel prices escalating, the economic aspect behind switching to electric vehicles is becoming more appealing.
So, is now the time to consider an electric vehicle? Here are some things to consider.
Economics of switching to an electric vehicle
The Energy Saving Trust states that a vehicle with a range of 200 miles can cost approximately £8-12 per charge. The equivalent distance in a petrol or diesel car could cost around £26-32, so around three to four times more. These figures are likely to be out of date and could be much greater now as fuel supply issues have caused petrol and diesel prices to accelerate.
Other savings can be made on electric vehicles as they have no vehicle excise duty and can qualify as zero-emission vehicles and be exempt from Congestion Charges and benefit from lower charges in ultra-low emission zones. They also have fewer mechanical parts which could reduce your maintenance costs. You could also benefit from free parking in some cities and towns.
If you are looking to invest in an electric vehicle you will need to consider where you are going to charge the vehicle and where it is going to be kept overnight. Ideally, you should charge the vehicle overnight when the demand is lower on the grid, this may mean that you need to install home charging points if vehicles are taken home at night or workplace ones if parked at work. However, it is worth noting that there are no capital allowances for charging points installed at home but there is no benefit in kind issue.
Charging points need to be located off-street and you will need to check that there are no capacity constraints on your site if you plan to use rapid chargers and install several of them. It is worth knowing that you can also allow anyone to use your charging points without any benefit in kind issues, so great for visiting customers.
There are many financial advantages in place for purchasing an electric vehicle over a petrol or diesel to increase take-up, these are:
• Benefit in kind amounts are based on CO2 emissions and therefore lower. The employee rates are 2% for fully electric cars, 14% for hybrid cars and 0% on fully electric vans based on 2022/23 figures.
• Vehicle Excise Duty is zero for fully electric vehicles and is reduced for hybrids.
• Capital allowances are eligible at 100% for both the charging points and the vehicle for the first year.
• Super-deduction of 130% applies on commercial vehicles such as vans until March 2023.
• Mileage rates for company provided electric vehicles is 5p per mile.
• There are also grants available to help purchase vehicles and install charging points, see below.
There is a grant available to help you purchase an electric vehicle which is available for low-emission plug-in vehicles. It offers a maximum grant of up to £1,500 on cars, however, it is also available for vans, trucks and motorcycles as well.
The Workplace Charging Scheme provides grants of £350 per socket to support businesses in installing charging points at their work sites.
Grants are no longer available to most homeowners to install charging points, except for those living in flats and rental accommodation.
Should I buy the car through the business?
Any car bought through a business that has personal usage will incur a benefit in kind charge. This will impact both the beneficiary and the business which you will need to factor in, but as detailed above these rates are lower than petrol or diesel vehicles. There are some tax benefits from purchasing the vehicle through the business as you will have the purchase price or finance agreement on your balance sheet which will reduce your tax liability. It is worth noting that eligible electric vehicles get a 100% capital allowance on the purchase on your tax return which will further increase this tax saving.
If you are planning to purchase the vehicle through your business it is worth reading our blog on Buying a Company Vehicle which explores the purchasing options and implications.
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