Some of you will remember the 80’s adverts with the Plasticine animals telling us all how good using electricity would be for heating and cooking, some will also remember the ill-fated Sinclair C5 electric car which no one purchased; then as the years went on we never really considered electric vehicles, that is until now. As accountants we’re often asked whether it is more tax efficient for a vehicle to be purchased through a company or personally, truth is that it really isn’t that easy to work out.
First of all any tax benefit will be calculated on the ‘list price’ of the vehicle, that is the price you would walk up and purchase a vehicle for before any discounting, trade in or dealer finance contributions; you then have the next decision – Petrol, Diesel, Alternatives or Electric. This will come down to some personal choice but you will find Diesel vehicle are being taxed much more heavily today than ten years ago; whilst vehicle duty rates favour Alternatives (Hybrid) or Electric, the personal taxation rates have yet to catch up but they are not far behind.
Cost of ownership will be another consideration, whilst those working for larger companies may not have to consider the cost of purchasing vehicles it’s fair to say most of our clients would count this as number one. Whilst the purchase price is likely to be a major factor in decision making, the cost of ownership over the first three years must also be considered; some of these can be controlled through fixed rate finance and vehicle service plans but other costs cannot be fixed – insurance, fuel, taxation rates are just some examples. We’ve even heard of clients claiming there electric vehicles will always be cheaper to ‘run’ than any others, this may be true when you’re charging your vehicle at home but what about those long journeys? The cost in time and electricity away from home? What about having that charging point installed at home? (They can’t be plugged into a 13A socket).
It’s fair to say that you can no longer afford to walk into a car dealer and purchase a vehicle without considering all your cost options or tax implications, even the likes of Tesla give you documentation to take to your accountant to help with your purchasing decisions; whilst a fully electric car is treated very favourably now for tax purposes (this might not always be the case) please don’t forget it may not be the cheapest option overall. You’ll still have to refuel that battery somehow and you’ll need to consider whether the range of the vehicle is sufficient for your needs, some roadside rescue operators do not include recovery of electric vehicles due to exhausted batteries as part of their standard packages.
Finally, let’s not forget the environment impact of vehicles; travel by car or van has an impact on us all and whilst it may be necessary in some cases it’s worth considering our travel choices. Can a journey be made by public transport, cycle or on foot? Technology has made a massive impact in being able to route plan using various means of transportation, so it is worth just spending a few minutes checking your options. One of our team recently traveled to Scotland by train at a total cost of £45 return by train and whilst some walking was involved it was still cheaper and quicker door to door than by car.
So before you jump in and buy your next vehicle, take a moment to consider your cost options and let us help with you with your tax choices - speak to one of our experience team on 01908 597904 or drop us an email to 'info@hippeyaccountancy.co.uk'