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Electric Cars

Paystream News

David McManus

Thursday 25th Aug, 2016

There are both financial and environmental benefits arising from the use of an electric car. Most people are aware that using an electric vehicle helps to reduce their carbon footprint.

On the tax savings side, once a small registration fee has been paid electric cars are exempt from having to pay the congestion charge in London. Owners of electric cars don't have to pay road tax on their vehicles.

For a business purchasing such a vehicle it will be able to claim a 100% First Year Capital Allowance on the cost (up to April 2018) providing the car produces less than 50g/km of CO2 emissions.

Employees enjoying the private use of a company electric car producing less than 50g/km emissions currently have to pay tax on a benefit-in-kind based on 7% of the list price of the vehicle although this does increase to 9% for the 2017/18 tax year.

Employers providing electric cars to employees have to pay Class 1A National Insurance Contributions on the cash equivalent of the benefit to the employee described above.

If the cost of fuel (recharging) is borne by the employer, unlike a diesel or petrol car, there is no benefit charge on the employee.

Although some may consider that electric cars are expensive there is no doubt that they have quite a lot going for them in terms of tax advantages.

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