A new “luxury car” tax, set to take effect on 1 April 2025, has sparked concern among self-employed and small business workers in the UK, as it could potentially affect up to 70% of electric vehicles (EVs), according to a recent report by Auto Express.
The tax, officially known as the Vehicle Excise Duty (VED) surcharge, targets cars with a retail price exceeding £40,000. While initially aimed at high-end petrol and diesel vehicles, the growing popularity and affordability of EVs has led to concerns that the tax could disproportionately affect those making the switch to electric.
Deadline for EV Tax-Free Benefit
To avoid the additional tax burden, self-employed individuals and small businesses considering purchasing an EV should aim to do so before 1 April 2025. Cars registered before this date will be exempt from the VED surcharge, even if their retail price exceeds the £40,000 threshold.
Expensing Company Car Tax
For those who already have a company car or are considering getting one, it’s important to understand the tax implications. If you use your company car for personal use, you’ll be subject to Benefit-in-Kind (BiK) tax. However, you can claim tax relief on the business use of your vehicle, including mileage expenses and fuel costs.
The amount of BiK tax you pay depends on the car’s CO2 emissions and your income tax band. EVs currently enjoy lower BiK rates than petrol or diesel cars, making them a more tax-efficient option for company car drivers.
Calls for Exemption
Industry experts and EV advocates are calling for an exemption for electric vehicles from the VED surcharge, arguing that the tax could hinder the UK’s transition to cleaner transportation. They urge for incentives rather than penalties to encourage EV adoption, especially among self-employed and small businesses.
Stay Informed and Plan Ahead
With the 1 April 2025 deadline approaching, it’s crucial for self-employed and small business workers to stay informed about the potential impact of the “luxury car” tax on their vehicle choices. If you’re considering purchasing an EV, act now to take advantage of the tax-free benefit. If you already have a company car, be aware of the tax implications and ensure you’re claiming all eligible expenses.
Disclaimer: This article is for informational purposes only and should not be considered tax or financial advice. Consult with a qualified professional for personalised guidance.