ELECTRIC CARS AND HMRC - ARE THEY TAX DEDUCTIBLE IN THE UK?
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- Опубліковано 5 лис 2022
- Wondering about whether electric cars can help reduce your tax bill? In this video Dan runs through the general rules and how the tax credit works.
Topics include:
HMRC rules electric cars
Electric car tax relief
Are electric cars tax deductible uk
Tax relief on electric cars
Electric cars tax credit
Capital Allowances
That Tesla for your limited company
… and more!
If you have any questions on this, please comment below.
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#accounting #smallbusinessuk #tax
I think you can fit another bottle on your shelf
Ha we have some spaces to fill up :-)
Fabulous video 👍👍👍🥂🥳
Glad you enjoyed Lawrence!
Great video! I’m a director of a small limited company. I currently lease a diesel vehicle. The only thing I claim is mileage. When my lease runs out I want to look at leasing an EV on a BCH agreement. Apart from getting tax relief on corp tax on the monthlies, is there anything else you can claim relief on? I’m not VAT registered. Can I claim for insurance/vehicle maintenance? Can I still claim the 45p per mile for business miles? Would I need to pay BIK?
With corporation tax going up to 25% or marginal rate over 50k - is it better to take relief on the depreciation over 'x' years rather than 19% full first year allowance? Massive thanks for all your excellent videos to date.
Its worth doing some calculations on your exact capital allowances (what you are describing) to see. The main issue with spreading instead of claiming 100% where you can, is the length of time it takes to get full tax relief.
Thank you for the video - great advise, do you offer Adcock advise for a fee of course .. ?
Sometimes we do! It depends on your situation as to whether we can advise / whether we would want to take the case on.
If you get in touch with our team that can arrange to discuss options.
I am struggling to get an answer to this can you help.
Sole traders
BCP v lease , the BCP contract has no optional final payment only a compulsory “balloon” this allows smaller monthly payments with you ending up owning the car. HMRC guide is a bit vague. but if i use this route rather than outright purchase how much capital allowance is allowed in yr 1?
Example :
Car 80k
Initial payment £30k
Monthly payment £500 x 36
Balloon £30k
Ideally I need to reduce gross profits by as much as I can ?
Thanks for the great video again. I'm hoping you may have the answer to the following question... with card readers such as Zettle they take a small fee 1.75% per transaction. In my current bookeeping I only process what enters the business bank account hence do not include the 1.75%. Is this correct or should the total I charge the customer be included and write the 1.75% off as expense. Many thanks!
Hi Jake that’s a common ‘mistake’. Should be shown as Sales full amount, expense of the fee.
Particularly important if tracking turnover for VAT.
If using Xero, Quickbooks etc software can do this fairly easily luckily!
Thanks for the great video!
I used to be a full time freelancer and so have my own Ltd, however in recent years I have been working mostly in a 9-5 in a permanent role. I still have my Ltd though and do occasional work on the weekends through it. This means that I only ever have a few k in my business bank account. Is it still beneficial for me to lease a car via my company or will it be more of a headache as only a little money comes through the company?
You might find tax aside, it's more a practical question of whether you could obtain a lease through the company, depending on length of time you've been in business and the financials.
Sadly we can't advise 1-2-1 here (due to professional regulations and the need to ask a load more questions!), but it could be worth investigating if you are making taxable profits in the LTD.
Great video , If a limited company buys the electric car fully and claims 100% capital allowance in first year, does the company have to then pay tax on the depreciation amount in second year ( ie is depreciation added in profits). For eg if company bought electric car of 50 K and took that off the profits for capital allowance ( whole 50 k 100%) , do they have to pay tax on depreciation ( tax on approximately 17 K ) in second tax year . And what happens in 3rd and 4rth Year ? Because tax will be due on whatever amount is received when company sells the car as well .Thanks
If you claim all in first year there is no further tax to pay, unless you sell. Then tax bill is worked out in the year you sell. Depreciation is generally ignored for tax purposes, it’s purely an accounting adjustment.
As a director of a 1-person UK limited company, am I allowed to purchase an EV company car through my limited company and use it for 100% personal use? And still get the Tax benefits like 100% write off in the first year and the 2% BIK?
P.s Great video!
I would also like to know the answer to this question please?
A company can buy a car and supply to an director. If its available for private use that's fine, because you pay benefit in kind 'tax' (although very low on EV) to account for this.
The corporation tax deduction is usually still available (the cost is part of your remuneration package effectively, if you think of it like a 'normal' employee), and the BiK will defo be chargeable as above.
Consider the longer term of whether you'd like company to own it, length you will own it (likely to have tax consequences on sale), if practically company can buy/arrange finance etc.
Thank you for the video - really helpful!
I wondered if you might be able to elaborate slightly on a certain point about the EV purchase. Assuming I wanted to purchase a £50,000 EV via the limited company and have retained earnings of £30k from year 1 of trading.
If I were to purchase this outright during year 2 of trading once the company has earned another £20k (pre tax), does that mean I would only benefit from tax relief for the £20k of profit up to that point? Or would I be able to 'carry forward' the remaining £30k to be offset from any subsequent profits in the same trading year?
Essentially, does the company need to earn the full cost of the EV (£50k in this case) in a single trading year prior to corporation tax being applied to gain the full tax benefits?
Thank you again for all your videos, they have been really helpful!
Yes if you creating a trading loss for tax purposes it’s usually available to carry forward.
What purchase options are available if you want to offset %100 of the cost of the electric vehicle? Would buying it on a PCP through a dealership allow this?
If we are talking Ltd companies then it's mainly making sure you avoid rentals / leasing. It's hard to describe without technical jargon but you need to *effectively* own it, but often you don't *acutally* own it until last payment....
Obviously you need everything in company name for this.
If in doubt getting it proposed purchase agreement checked by a pro.
Hi, great video.
If I lease an EV through my Ltd company, is the initial deposit payment on the lease also tax deductible from corp tax?
You mentioned in the video about claiming back electricity costs for charging the EV, I charge the EV at home so how would I work out what to claim back and what paper trail is needed as the electricity usage obviously includes charges for the whole house? Do I still need to keep a mileage record for business travel ?
The deposit is often ‘advance rent’ so usually deductible. Cost for home charging yes can be claimed if company car. You’d have to work out the amount of units x pence per unit.
Business mileage shouldn’t be needed if company paying for all, and benefit in kind being paid.
Thanks 👍 is this all still applicable with recent government changes Dec 2022?
Yes they get a little worse but still very efficient.
Great video! I currently have a full time job and pay taxes as a higher rate tax payer, via PAYE. This is a temporary role.
I am also working part-time as a hackney driver and I will likely continue this, alongside my temporary work.
If I purchase an electric vehicle for my hackney job which I declare in my SA100, can I claim the full purchase expense? And will this be offset against the taxes I have already paid via PAYE?
Am I right in assuming I will have overpaid tax in this scenario?
Sadly we cant give 1-2-1 advice here, but in general terms:
If you purchase a car for business you can likely claim 'capital allowances' that will reduce your self employed profit.
These allowances will be restricted for any personal use of vehicle.
If you make a tax loss, you can often offset some of this against other income.
This may generate a tax refund.
Hope that helps.
Thanks for the video, does the limited company pay all the insurance? How is the personal use of insurance get accounted for?
Just noticed you mentioned you can put running costs through. I guess this mean the insurance can go through the limited company
If you are putting car through like this all costs company pays for. The ‘taxable benefit’ charge is worked out in this odd way on list price.
Tax is paid by submitting some company forms (p11d/p11d(b)) and including the benefit on your personal tax return.
Does BiK only applies to new electric car? I have a Ltd company but I don’t have £60,000 sitting there in my company account. However, I can afford to spend no more than £30,000, so can I buy a used EV get the same benefits?
No the BiK is based on emissions. The ‘new’ bit is mainly concerned with the extra ‘capital allowances’ you might get on the total cost of the car.
I’m interested in a used too but I don’t find any answer on google (so maybe it’s super obvious!) about BiK list price of the used purchase price or price when it was new? I always associated list price with new cars and market value with used.
I want a tesla x but they only make them in left hand drive now so a used right hand drive is my only option. Thanks in advance.
@@afifadanish7868it’s based on the new list price
Hi, what about if you lease an EV over say 24-36 months as a sole trader? Are the monthly costs deductible for mileage you use it within 'business miles'? Much appreciated!
Principles are here: ua-cam.com/video/PPnzNvLp3k8/v-deo.html&t
It's likely yes lease costs, but restricted based on any personal use.
I am seeing more and more schemes for salary sacrifice. I am in slightly odd position of being a LTD business owner and also being employed. Neither are in the higher rate tax bracket on their own, is there benefit to salary sacrifice vs Thru limited company?
Unfortunately that's hard to answer here as the answer is so dependant on the exact numbers, costs and goals.
'Sal Sac' is more difficult for many costs these days because HMRC changed up the rules a few years back as people were effectively being too aggressive.
In the small business owner world, you don't see them used that often (dividends are more frequently used).
Hi - Thanks for this video, helpful! I do have a question - here is my context - I own a limited company of 2 directors in the and we're ending month 4 in our existence and doing really well so far. We're trying to be as sensible and tax efficient as possible. And whilst I don't want to take on excessive risk early, i do need to get rid of my diesel guzzler. So I'm very interested in an EV through the company.
What I need to understand is when you say BUY what does that specifically mean? I'm actively trying to minimise my corporation tax bill and projecting forward for end of year 1 trading I'm looking at £30 - 40k CT on profit. Does that mean I am limited to 'buying' a car that is total value no greater than 30-40k if i want the 100% CT relief via capital allowances?
What if I 'buy' it over 3/4 years? does that not count?
In terms of funding a purchase, realistically given short trading time, I will need to take a personal loan, then inject that into the business as a directors loan in order to buy the car. Is there an issue there?
I think a video specifically on the mechanics of how to best go about procuring the EV would be a great idea ... I can't be alone in thinking this!
Thanks
Hi Adam,
Firstly, congrats on the new business - best of luck with it! While we can't give 1-2-1 advice here, some generic points that could help:
*'Buying' is a little technical to cover in a comment, but it's usually the act of paying outright, or arranging traditional hire purchase / loan style finance. It's basically not a rental / lease situation.
It's technically more complex than this, but this covers 95% of scenarios in reality.
*If the car you 'buy' is more than your profit, you would likely wipe out the tax in that year and carry in excess tax 'loss' forward into the next year.
*As you state, finance companies are unlikely to fund a purchase on a company with no history.
If you do as you describe, the main thing is the be sure all the docs/reg are in the companies name, regardless of how you funded it.
Hope that helps
If you use hire purchase on a second hand car, how would the tax relief work. I understand you wont get FYA, but does it still come off the value before cooperation tax?
Yes depending on the car and way you funded, you get ‘capital allowances’ which give you a small % a year of the value of the car on tax relief.
If self employed and bought new ev under rent to buy agreement can i claim 100% in the first year,and assuming that can claim the cost of the car what happens with the interest,or is it advisable to claim the monthly payments as capital allowance.Can i still claim car depreciation on top?many thanks
This one is difficult to answer here because it depends on the small print of the agreements. There could be generally 3 combos of treatment in play.
Hiya, so in a ltd company 100% price of the vechicle can come off your profits to reduce profits so pay less tax, what about the second year.. is it based on the car value in the second/third year?.. great video :-)
If you use the 100% allowance for in year 1 you get nothing thereafter on the purchase price. It’s ‘tax base’ is zero technically thereafter.
Effectively you’ve had all the relief in one go.
@@HeelanAssociates thank you for responding. So you could split the allowance over several years? Say 33percent each year for 3 years then change the car?
@@markzaccaria3106 I’d like to know this too!
@@HeelanAssociates how long would you need to keep the car for, not to owe any money if you sold the car after w years? Thank you :-)
Hi there. I run a VAT-registered limited company with an annual turnover of £100k. I've been eyeing a Porsche Taycan (EV) worth £100k and I'm really tempted to make the purchase. What do you think? :/ (note: I'm in IT industry and cannot find any expense)
It’s the usual question - do you wanna spend £100k to save probably circa £20k tax? If you need and want the car then great, there are tax benefits. If not it’s just weighing up cost vs benefit.
@@HeelanAssociates thank you! I was going to plan this but recent news about ev’d totally changed my mind. will wait a bit more to see
Are the lease payments only 18% deductible? vs. The outright 100%?
£60k 100% deductible?
£1000pcm 18% deductible?
It depends on the ‘lease’. If it’s a true lease where you never own it (often monthly bills will have VAT on) then you don’t get the 100% upfront. You get relief at the rate you pay corporation tax (19-25%) usually in the year you spend the money.
What about leased EV Car by Limited company ?
You will generally get tax relief on the payments you make in the year.
hey great video,
Could you explain or if you have video about how to get money out from my company to cover the home charging cost for an electric car as a director. Can i just transfer the charging cost after milage to my personal account so i can pay the electricity bill or not sure what is the right way as i dont have receipts now if i charge it at home. Thanks
This one if very dependent on various factors to be able to answer correctly. Detailed help here www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23900
@@HeelanAssociates thank you 🙏
Hi, fantastic video!
I am an area manager and I've been given a decent ev to drive.
I have had to self-fund a home charger.
Do you think there is anyway that I can claim tax relief on this, even though I am not a business owner?
The car is used 80% business, and 20% personal.
Possibly is the answer! Much depends on the specific circumstances but there are useful flowcharts here: www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim23900
@@HeelanAssociates Excellent, thank you for the response.
It looks as if I am not able to claim anything as the business reimburses my electricity costs..
I appreciate you sending the link!
Hi thanks for your excellent video, I am a sole trader for my main job and a higher rate tax payer. I also have a small limited company for buy to let properties. Would it be better to buy an EV as sole trader and claim 90% business use as a higher rate tax payer or would it be better to do it through limited company ? Many thanks
To answer that specifically would need detailed info and further questions, but in general you’d want to use it where you are paying the highest tax rate. It’s likely your sole trade is where this is occurring?
@@HeelanAssociates Thank you so much for much for your reply. I think it would be through sole trader as I am paying more tax as a sole trader but will double check with my accountant too. Thanks again. Best wishes
Question please if you could answer asap
Say company corporation tax bill is say 10k based on 50k profit at 19%
I buy a 50k tesla 2023 so therefore my profit is zero there no ct tax due
3 years later i sell the tesla for 35k
Do I then owe hrmc 19% on the 15k deprecation or 19% on the full sales price?
Thanks
Josh
Hi Josh,
Presuming the rate of corporation tax is 19% in the year you sell, you'd effectively have a CT bill on the sale of the car of £35k @ 19% = £6650. If you imagine this means you get tax relief on the actual cost to the business (£15k).
@INAccountancy , thank you, is it only hire purchase method thats allows me to put the full value of the tesla as an expense to save my corporation tax bill in the first year? Thanks
Its a bit detailed to explain here, but its basically ownership of the risk/reward you need, so something like hire purchase or outright purchase is what you are looking for full relief in year one, not lease hire for example@@jtlondon81
Thanks for the informative video.
I have a question, if my limited company has 25K and I want to buy a 55k electric car. Can I personally loan 30k to the limited company and carry the losses forwards in years 2/3 until the company has paid me back the loan for the car. Would this still be 100% tax deductible in years 2/3? Thanks
So in general terms:
*Yes can loan company money
*If as a result of buying the car (subject to all the conditions) it creates a tax loss, usually can carry forward and offset against future profits. It's the car that creates the deduction rather than the loan.
*Generally once funds available can repay loan account with no tax consequence personally. In generating this cash the company might end up paying some tax though anyway, if it generates profits over the losses it's brought forward.
I’m self employed using basic accounts, only used for business, is it all tax deductible?
Thanks
Hi, i'm not sure I understand the question, could you expand?
Does the car have to be bought in the uk? Say I want a left hand drive Tesla,could I buy in France?
Yes location of purchase doesn’t usually exclude if from tax deduction.
@@HeelanAssociates great so I could buy in France. Thanks!
Is it possible to buy a used ev and still see some tax benefits?
Yes just not the 100% allowance. Likely 18% a year on cost and a fairly tax efficient way of dealing with running costs. Much depends on vehicle and situation though.
Can you not just sell the Tesla back from the LTD company to yourself for a nominal amount. Not a crazy red flag amount of £1 maybe £5000 or something like that??
You could but the way these tax allowances worth effectively means you’ll pay back almost all of the tax relief you claimed the year before.
Hi, I am registered as a Sole Trader and work as a Private Hire taxi driver. I bought a Tesla in December 21 and sold my Mondeo for £4 to use as a deposit. Tesla was £49,950 M3-LR (New).
When I submitted my Tax Return i claimed the full £49,950 back as a 100% allowance but now I am thinking it would be better for me to claim 18% back as a CA instead of the 100% because by YR3 My allowance will have ran out and I will be paying 20% of the finance repayments. Or if I sell the Car after 2 years the income that provides will be taxable at 20% (could be as high as £35k) if I don't buy another car. I will seek an Accountants advice but which is better 100% CA or 18%/year over 5 years.
It’s a hard one to explain here in a comment, and defo seek out some calcs and advice on your situation, but as a side note I’ve only seen it once in 16+ years where someone didn’t claim the upfront 100% where it was available.
There is lots going on here to explain, but the 18% reduces each year so takes longer than ~5 years.
Defo chat through intentions, estimated income and look at some figures.