Have you considered buying or leasing an electric car? Currently, the car benefit in kind is very low for zero-emission electric cars.
For example:
Hyundai Kona Electric Hatchback
Lease cost: £335.34 per month plus VAT (£402.41 inclusive of VAT). Therefore, the annual cost of car provided by the company would be £4,426.56 if VAT can be reclaimed.
For the company:
VAT is reclaimable at 50% of the VAT cost -so £33.53 a month if you are VAT registered.
There is also a potential Corporation Tax saving on lease payments in this example (assuming 50% VAT reclaimed) of £841.04 per annum.
For the individual/director:
P11D Benefit-in-kind value of the car = £662.50
The benefit in kind amount is included on your personal tax return and is either covered by your remaining personal allowance or taxed at 20%. Total tax at 20% in this example = £132.50.
There is also employer’s national insurance payable on the benefit in kind of £99.71. (This cost is deductible for the company for corporation tax purposes).
Summary
| Savings in corporation tax (company): | £841.04 |
| 20% income tax increase (individual/director) | -£132.50 |
| Employer’s national insurance increase (net of corporation tax saving): | -£80.77 |
| Total tax saving (individual/director and company): | £627.77 |
All data and information provided in this article is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this article and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.