Writing Off Your Electric Car Against Company Profits

21 November, 2019

Writing Off Your Electric Car Against Company Profits

Apart from being good for the environment, being able to write-off the cost of an electric car in the year of purchase is very appealing to businesses as it boosts your cash-flow.

Since electric cars have zero carbon emissions, it is possible to claim “first year allowance” when a new car is purchased, for tax purposes. Effectively, this means you can write-off even 100% of the cost against business profits (in the same year the vehicle purchase is made).

But it’s important to note that this allowance is only available for new electric car purchases. In the case of a used electric car (for business), you can only claim a “main rate” writing down allowance of 18%.

Self-employed traders, however, will need to reduce their claim for either of the above-mentioned allowances if there is any private use of the vehicle.

The main and special rates apply from 1 April for limited companies, and 6 April for sole traders and partners. The first year allowances rate applies from 1 April for all businesses.

Now, when the car is sold, you should know that if you have claimed 100% of the first year allowance then all the proceeds of the sale will be taxable as a balancing charge. Of course, if there has been any private use, the balancing charge will be reduced.

Even if you use an electric car that belongs to a company (i.e. it’s a company car),  it will still attract a car benefit charge for the driver and a National Insurance charge for the employer, albeit a the lowest rates.

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Blog post by: Nabeel Khalid

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