• CALA Associates Ltd

Purchasing a Hybrid car through your Limited Company

Updated: Dec 7, 2021

In our last blog, we looked at the personal and company tax implications of purchasing a fully electric car through your Limited Company. This time we're going to take a look at purchasing a Hybrid vehicle.

Tax for Your Limited Company

Unlike fully electric cars, hybrid vehicles are not eligible for 100% capital allowances; however, they are still eligible for tax relief in the form of Writing Down Allowance (WDA). The rate of this depends on the range/emissions of the hybrid vehicle you're purchasing.


Let's say you're planning to buy a Skoda Octavia iV estate. The emissions of this vehicle are 31g/km so qualifies for a WDA of 18%. If the vehicle you're buying has emissions of 50g/km this reduces to 6% WDA.


Example: You purchase a Skoda Octavia iV Estate for £35,000. This asset qualifies for a WDA of 18%. Therefore you can deduct £6,300 from your profits before tax.


Tax for You / Your Employee


As is the case of a fully electric vehicle, you / your employee will be subject to Benefit In Kind tax or BiK. The rate at which this is paid is dependent on the range of the Hybrid vehicle in question.


The following table provides the relevant BiK rates.

Going back to the Skoda Octavia example above, which has an emissions rating of 31g/km and a range of 44 miles. This means it attracts 7% BiK. On a Skoda Octavia costing £35,000, this is £2,450 and attracts tax at the rate of the taxpayer. For a standard rate taxpayer, that equates to £490.

Additionally, the company pays National Insurance contributions on the total BiK.


VAT Considerations


As with the fully electric example in our last article. VAT can only be recovered if the vehicle is used entirely for business purposes.


Compliance Considerations

You/Your company will have some additional statutory requirements to complete: - P46(car) informs HMRC a car is provided for private use. - P11d/P11d(b) issued (even if the charge is nil).

- Benefit reported on employee/director self-assessment.


Conclusion


As you can see from this article, the tax implications associated with Hybrid vehicles is a little more complicated than fully electric vehicles and therefore requires careful planning. We can help you determine the best options for you so please contact us

#hybridcar #smallbusiness #tax #accountant

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