Electric Cars vs Gas Guzzlers - YouTube

I am Tim from SONNET - the money-saving, Chartered Certified Accountants.

This time we're going to look at electric cars. There are big tax differences

between electric cars and regular fueled cars and the government are doing that

because they are lower on co2 emissions. But cars and tax are a

complete minefield - so is there a big difference?

Is it worth bearing in mind when you buy your next car?

So the purpose of this video is

we're going to look at a £20,000 car and compare gas guzzler versus

an electric car. Big health warning though - tax law is constantly changing

especially with cars and it's different for each personal circumstance, so make

make sure you take advice especially in this regard when you're making a decision.

So we're going to look at VAT, we're going to look at fuel duty, we're

going to look at vehicle excise duty we're going to look at the business

taxes, including benefits in-kind.

VAT - when you purchase a car regardless

of the fuel type there is no difference it's 20%. However when you fill the car up,

or 'fuel' your car, then it's 20% on regular fuels, like petrol and diesel,

it's 5% if you charge your electric car at home.

Fuel duty - that's 60 pence in the litre is an additional fuel duty. Most of what you pay of a petrol

forecourt is tax whereas with an electric car there is no fuel duty- It's zero.

Vehicle Excise Duty - what most people would call road tax.

Well if your car was registered before the 31st of March 2017, you're paying £555

a year for the biggest gas guzzler as opposed to free for the

electric car. If you buy your car now then you're looking at paying a

£2,000 first year rate, roughly, and then £140 a year thereafter as

opposed to free for an electric car.

Business taxes

You can claim the cost of

an asset off your taxable profit, but you have to spread it over a certain period

of time. With cars that is a long time. With a £20,000 gas guzzler you can claim

£1,600 in the first year £1,472 in the second year £1,354

in the third year. As you can see it's going

to take a long time, in fact you'll probably sell the car before you claim

capital allowances in the normal way. With an electric car you can claim the

£20,000 off your taxable profit in the first year, straight off -

Boom!

So, benefit-in-kinds - this is when instead of receiving cash you receive

a benefit, like the car or the fuel in the car. I'm going to assume you're

getting both and that you are an additional rate taxpayer, the

highest rate of tax. For this £20,000 gas guzzler you're

looking at paying £7,000 a year in tax personally.

You pay for the car in less than three years in tax.

Whereas with an electric car currently it's

about £1,200 - in 2020 that's going down to £200.

If you're a standard rate taxpayer you can have all of those numbers and you can see the difference.

For the company you're looking at paying £2,200

in tax for the gas-guzzler, as opposed to £360

in tax or £55 in tax in 2020.

now if your know if you've got an owner managed business then you've got a consider both of

those taxes and, yes, if you get it wrong you're going to be paying for the

car again in tax in just over two years. Get it right and you can claim your

first year allowance and very little tax after that from a benefit-in-kind

point of view. For vans there's not that much difference in tax and the

benefits actually going to get worse over the next couple of years but they're

already in a very good tax position because they're not viewed as a personal

benefit in the same way as a car.

If you own the car yourself and you're claiming

the mileage, 45p a mile for the first 10,000 miles, then it's the same for

electric glass of regular cars, so the effective cost of the fuel and the

benefit that you'll be getting that which is always a good thing.

Now these are two extreme examples, but you can see the difference is quite a difference.

Cars are complicated though - if you're buying a Tesla Model S at

£70,000 it's a bit different... But, remember also, tax is just one element -

the initial cost, the purpose of the vehicle- every business is different and

individual, so bear that in mind as well. But if you want to do the sums from a

tax point of view when you've got a couple of cars in mind then let us know -

it could save you large.

So we've looked at some of the taxes that

affect cars, with a specific focus on electric cars.

If you're accountant doesn't give

you that sort of advice then come and speak to us, we can help your accountant

work smarter - or we can be your accountant. We'd love that to be the case.

But remember, if you like this tip click like on social media, and share it,

and all of those things. It benefits us and it benefits you.

If you want to know more please just drop me a line, email, telephone - it's free

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But for now, thanks for watching. This is Tim Burton from

SONNET - the money-saving, Chartered Certified, Accountants.