Skip to content

Lower Tax Burden - Discover the Financial Advantages of Using an MG as Your Business Vehicle, Saving You a Significant Amount

Financial benefits entice workers to convert to electric vehicles, with MG models being a cost-effective option detailed in this write-up.

Streamlining Taxes: How Opting for an MG as a Business Vehicle Could Lead to Significant Savings
Streamlining Taxes: How Opting for an MG as a Business Vehicle Could Lead to Significant Savings

Lower Tax Burden - Discover the Financial Advantages of Using an MG as Your Business Vehicle, Saving You a Significant Amount

Leasing an electric or plug-in hybrid (PHEV) company car in the UK comes with a host of tax benefits and savings compared to petrol or diesel cars. These advantages are primarily due to lower Benefit-in-Kind (BIK) rates, favourable capital allowances, and lower operational costs.

Lower BIK Rates and Tax Savings

For the 2025/2026 tax year, fully electric cars attract a very low BIK rate of just 3%, compared to much higher rates for petrol or diesel cars, which can go up to 37% depending on CO2 emissions. This low BIK rate means employees pay substantially less income tax on the benefit, and employers pay lower National Insurance Contributions. Plug-in hybrids pay BIK tax according to their emissions, with lower rates than traditional cars but generally higher than full EVs [1][3].

Enhanced Capital Allowances

For companies purchasing or leasing electric cars, a key advantage is the 100% First Year Allowance (FYA) on the vehicle cost for new, unused zero-emission cars. This allowance enables the business to deduct the entire purchase price from taxable profits in the first year, greatly reducing corporation tax liability. Second-hand electric cars qualify for an 18% annual writing down allowance instead, offering ongoing relief [1].

Lower Operational Costs

In addition to the tax benefits, electric and PHEV company cars offer lower running costs, including cheaper fuel (electricity) and maintenance, as well as exemptions or reductions from congestion and emission zone charges in many UK cities, which petrol and diesel cars often must pay [2].

Government Incentives and Simplified Leasing

The government encourages salary sacrifice for items considered desirable, such as leasing an electric car. Employers may already offer salary sacrifice schemes for items like Cycle To Work or child care, which can include electric cars. The government offers incentives to employees for switching to electric or PHEV company cars [2].

Leasing companies handle the simplicity of electric car leasing, with no upfront cost or balloon payments at the end of the lease.

Case Study: MG's Electric Cars

MG's electric cars are popular choices for salary sacrifice due to their desirability and value. For instance, a 40% taxpayer would pay just £764 in vehicle benefit driving a MG HS Plug-in Hybrid for the 2025/26 tax year. An additional £677 would be paid if they receive fuel for private usage in a MG HS Plug-in Hybrid [1].

A standard 7kW chargepoint can add more than 200 miles of charge to an MGS5 EV over an 8-hour workday. The tax for an MGS5 EV in the 2025/6 tax period will be significantly lower than for a diesel car. For the MGS5 EV Trophy Long Range, the tax would be £404 [1].

Salary Sacrifice Offers Significant Savings

Salary sacrifice offers decent savings on 'big-ticket' items like a car lease on an MG EV for top rate taxpayers. The government's Workplace Charging Scheme also provides grants for employers to purchase and install EV chargepoints [2].

In summary, the key tax benefits and savings for leasing an electric or PHEV company car versus petrol or diesel in the UK are:

  • Much lower BIK tax rates (3% for electric in 2025/26 vs up to 37% for petrol/diesel).
  • 100% First Year Allowance on purchase cost for new electric vehicles, reducing corporation tax.
  • Reduced National Insurance Contributions due to lower BIK.
  • Potentially lower Vehicle Excise Duty for electric cars, with plug-in hybrids paying some tax depending on emissions.
  • Exemptions from urban emission zone charges.
  • Lower operational costs overall (fuel and maintenance) [1][2][3][4].

For more information about MG's award-winning range of electric and Plug-in Hybrid cars, click the provided link.

[1] - https://www.gov.uk/guidance/company-cars-and-fuel-benefits-for-employees [2] - https://www.gov.uk/guidance/workplace-charging-scheme [3] - https://www.gov.uk/guidance/benefit-in-kind-for-company-cars [4] - https://www.gov.uk/guidance/vehicle-excise-duty-vehicle-tax-for-cars-and-motorcycles#new-vehicles

  1. Businesses that lease electric or plug-in hybrid (PHEV) company cars may enjoy enhanced capital allowances, as new, unused zero-emission vehicles qualify for a 100% First Year Allowance (FYA) on the vehicle cost, significantly reducing corporation tax liability.
  2. Individuals who opt for electric or PHEV company cars can benefit from lower operational costs, including cheaper fuel (electricity), reduced maintenance expenses, and exemptions or reductions from congestion and emission zone charges in many UK cities, leading to overall cost savings.

Read also:

    Latest