Are you a business owner or senior team member looking for your next vehicle? If you’re not running your car through the business you are missing out on very significant savings.
Whether it be an electric vehicle (EV) or a plug-in hybrid vehicle (PHEV), there are so many options now available to the masses. Business leaders can take advantage of this by saving money on tax, fuel and maintenance through their business.
Why lease through your business?
For many businesses, monthly lease costs can be offset against corporation tax, and a portion of VAT may be reclaimable, especially if the vehicle is used for business purposes. The end result is often a lower total cost of ownership than buying outright, with none of the hassle of resale or depreciation risk at the end of the term.
When it comes to running a car through your business as a director or business owner, the perceived wisdom has always been ‘My accountant has always said that it doesn’t stack up to run my car in the business’. This is 100% true for petrol and diesel vehicles where the Benefit in Kind (BiK) tax you pay for the privilege of running your car in the business makes it far less cost-effective. This all changes with long-range Hybrids and EVs.
There’s no doubt that EVs are eating up more of the automotive space year after year, which has led a lot of people to spread negativity about their use. However, it is a fact that 92% of our clients who have selected an electric vehicle have said they do not plan to go back to petrol and diesel cars ever again.
Is an EV right for me?
If you think you’re ‘not ready’ for electric vehicles, consider our simple 2 question test before dismissing the idea.
- Do you regularly drive more than 200 miles per day?
- Do you have easy access to a charger regularly?
If the answer to the first question is yes, stop and re-consider electric for now. We could tell you you’ll save lots of Co2e, you’ll save a fortune in fuel costs if you’re doing high mileage and other noble reasons, but to be honest, at times driving 200 miles plus a day is likely to be a pain, or at least it is going to require planning.
If, like 96% of our driver clients, you do not do more than 200 miles a day, and you answered yes to the second question of having the capacity for installing a chargepoint at home, what are you waiting for?
When it comes to hybrid vehicles, it is all about the EV-only range, as our table illustrates below. Your tax bracket is linked to how far the car is able to travel just on the battery. The higher the range, the lower the tax you’ll pay.
If you’re able to find a hybrid vehicle with range over 40 miles, and especially with range over 70 miles, it is likely a hybrid vehicle through business leasing will work out as a considerable saving over personally financed equivalents.
| CO2 (g/km) | Electric range (miles) | 25/26 (%) | 26/27 (%) |
| 0 | n/a | 3 | 4 |
| 1-50 | >130 | 3 | 4 |
| 1-50 | 70-129 | 6 | 7 |
| 1-50 | 40-69 | 9 | 10 |
| 1-50 | 30-39 | 13 | 14 |
| 1-50 | <30 | 15 | 16 |
A few things to keep in mind
- VAT and maintenance: When it comes to leasing a business vehicle, you’re wise to always include maintenance in your contract. Whilst 50% of the VAT is reclaimable on business lease costs as the above shows, it is the full 100% of VAT that is reclaimable on the maintenance, effectively saving you 20% on your servicing and tyres, even before other tax considerations come into play.
- Energy costs: As we’ve previously illustrated, you should be saving 60-70% on your electric charging costs vs. the petrol or diesel you’ll pay for at the pump. Think 16p per mile with current fuel costs at the pump, and 4-5p per mile for the electric driving in your plug in car.
- Avoid the ‘mild hybrid’ illusion: If your car is a ‘mild hybrid’ it is effectively only a hybrid in name, with the likes of Toyota and Lexus, in particular, as well as Land Rover, bordering on misleading with their talk of ‘hybrid vehicles’ for those cars without a plug. None of these fall under the 50 g/km bracket that is a requirement to be tax efficient, and in reality, aren’t particularly great for your wallet or the environment.
Our Business Concierge service
While money matters in business, there’s one asset even more valuable: time. Sourcing and managing a vehicle shouldn’t distract you from running your company. That’s why we created our Business Concierge service: a smarter, more strategic way to lease vehicles through your company, backed by personal guidance and a level of service that goes far beyond the standard.
We often hear from company directors who are exploring EV Salary Sacrifice for their staff but aren’t sure what the best route is for themselves. In many cases, directors fall outside of PAYE and can’t benefit from Salary Sacrifice Schemes. That’s where our Business Concierge service can step in.
While most brokers and online platforms will simply quote you a price and send you on your way, we go deeper. We help you understand the most tax-efficient way to lease through your company, guide you through funder approvals, and support you with structuring the right kind of agreement based on how your business is set up.
Pike + Bambridge are the official partner of the Institute of Chartered Accountants of Scotland (ICAS), and regularly contributes to industry expertise on tax-efficient methods for businesses and business owners to run their vehicles. Click here for a tax webinar with P+B CEO ran with ICAS regarding EVs and tax.
