Update on tax breaks on electric cars
7th June 2017
As electric cars (or hybrids) become cheaper and more accepted, many more will be bought to use as company cars. They have relatively low benefits in kind PLUS taxable profits are reduced by the cost of the car in the year of purchase.
Buying Electric Car (as Company car)
If you take £30,000 profit from a company to buy an electric car for personal use:
Car cost = £30,000.
Tax = nil (just an annual benefit-in-kind – 9% in 2017/18).
Buying Petrol/Diesel Car (as Personal car)
Use £30,000 profit to buy a fuel car for personal use. Leave Corporation Tax in the company (at 19% = £5,700) and take a £24,300 dividend. Then you must set aside money for income tax on the dividend (marginal rate: income tax 25% + dividend tax 7.5% = £7,897), leaving £16,403 available for a petrol/diesel car.
Cash for Car = only £16,403
Cash to HMRC = £13,597