From 6 April 2020, businesses can claim 100% of the cost of an electric vehicle against the profits of the year of purchase and there are no restrictions on the value of the vehicle.
Businesses can benefit from the new super-deduction, which offers 130% first-year allowance on qualifying electric charging points for cars and vans. To qualify for the relief the company must use the charging point in their own business. This will last until 31 March 2023.
From 1 April 2021, pure zero emission car can qualify for a 100% first year allowance (FYA) and the car is purchased new and unused. A similar 100% FYA applies for zero emission vans, where the vehicle is purchased new and unused before 1 April 2021. Commercial vehicles already qualified for 100% relief under the Annual Investment Allowance.
Cars with CO2 emissions not exceeding 50g/km will be added to the main pool for capital allowance purposes, so attract an annual writing down allowance (WDA) of 18%. Cars with CO2 emissions exceeding 50g/km must be allocated to the special rate pool, where the WDA is 6%.
Example:
Buying a £50k + VAT car through business and using 50/50 business and personal. Higher rate tax payer.
Cost of car: £50,000
VAT (£50k * 20%): £10,000
Corporation tax deduction (£50k * 19%): -£9,500
Income tax saved: -£24,000
National insurance saved: -£7,200
Benefit in kind tax (£6,500 * 40%): £2,600
Class 1A national insurance (£6,500 * 13.8%): £897
Net cost after one year: £29,997