What are the Tax Benefits of Leasing an Electric Car?
What are the tax benefits of leasing an electric car?
Company cars have long been a popular and attractive benefit for employees. It can be essential for senior staff who have to travel long distances and can even factor into securing or retaining key members of your team.
However, outright buying vehicles for staff can be extremely costly. As an alternative, many companies instead lease vehicles; essentially renting them from a company before returning them at the end.
This option has always come with pros and cons. However, the last few years have also seen the introduction of strong tax credits and incentives to lease electric cars and other low-polluting vehicles specifically. This leaves businesses with numerous benefits to consider, both in terms of reducing their carbon footprint and tax breaks.
So, what are the tax benefits of leasing an electric car? In this article, we explain the UK’s electric car leasing tax benefits, as well as how to decide whether EV leasing is the right choice for you.
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Tax benefits of leasing EVs
The UK government has introduced numerous tax incentives for businesses leasing cars, with bonus savings for electric car leasing:
Corporation tax
Electric car lease payments (as well as those for any vehicles with emissions of 50g/km or below) can be counted as a deductible operating expense. This lowers your taxable income, reducing your overall corporation tax bill.
Furthermore, the vehicle in question won’t come with issues relating to value depreciation, capital allowances or fixed assets, as it can simply be returned at the end of the leasing term.
VAT savings
When a company leases an electric car
, it can enjoy VAT benefits. When a leased car is used for company and personal use, a business can claim back 50% of the VAT charged on monthly leasing costs.
This rises to 100%, provided the business can prove to the HMRC that the vehicle is not for personal use. However, you should not make the mistake of thinking this is an exploitable tax loophole. In practice, it is very hard to prove, though there are exceptions for EV leasing for businesses such as taxi firms.
BIK payments
Companies pay National Insurance on Benefit in Kind (BIK), which includes non-cash based ‘benefits’ like company cars. While EVs are still subject to tax on BIK, the electric company car tax rate is only 2% of the EV’s taxable list price (P11D value).
To put this in perspective, the tax can be 37% for a vehicle with average CO2 emissions for the UK. In other words, EV leasing can be a far more economical option when it comes to National Insurance payments.
Road tax
When signing a leasing contract for a vehicle, it will usually cover that vehicle’s road tax. However, until April 1st 2025, electric cars are exempt from road tax or VED, lowering the potential costs for companies.
While this will change in April 2025, there is still at least one benefit to consider; namely that, new zero-emission vehicles registered after the 1st of April 2025 will only be liable for a low first-year VED rate of £10. This will switch to the standard rate of £190 per year from the second year onward.
So, while certain benefits of leasing EVs are temporary, there are still future perks to consider.
Electric car leasing with Kia
If your organisation is looking to lease an electric car, Kia offers a range of contract hire cars
designed to suit the needs of any business. This includes more recent, award-winning models such as the Kia Sportage and EV9.
When a business leases an electric car through Kia, it can also enjoy maintenance from Kia dealers using genuine Kia parts.
Visit Kia today to check out our latest electric vehicle lease deals.
Electric commercial vehicles
As the EV industry continues to grow and develop, many manufacturers, like Kia, are now building electric commercial vehicles. Nowadays, many of the above light commercial vehicles are available with hybrid
and electric
powertrains.
Choosing an electric commercial vehicle can have many great benefits for your business. Beyond being a more sustainable form of transport, electric vans also offer greater efficiency, lower running costs, and various tax benefits.
At Kia, we’re expanding our EV line-up to include a pioneering range of electric vans
. Named our PBV Concept range, our upcoming electric vans are designed to more effectively meet the diverse needs of commercial customers. From large panel vans to smaller commercial vehicles, the Kia electric van range will offer different profiles and interiors that you can modify to suit your own unique needs and unlock new business opportunities.
FAQs
Images shown are for illustration purposes only and may not be to full UK specification. Features shown are not standard across the Kia model range and availability will vary dependant on model. For further details please refer to the individual model specification sheets.
Product availability varies by models. To find out which products are available for your vehicle, please contact your Kia dealer.