In last week’s blog, Aedin told us about her love of bookkeeping and how this helps our clients. Ger sent me some numbers on the BIK cost of having an electric car yesterday. It was a query that came in from a client about buying one. I looked at the numbers and it led me to the conclusion that the time is now to buy one. We will look at
- What is electric
- The savings
- Some Tax – but not too much
What is electric?
An ‘electric vehicle’ is one that derives its motive power exclusively from an electric motor. I didn’t come up with that definition. I wouldn’t be able. It is from a Revenue manual. So, it is not a hybrid or hydrogen, or anything else. It is 100% electric.
I don’t do a huge amount of driving. Out the road to Dunhill, into town now and again, and up to Kilkenny once a week. Average enough. The most I ever needed to fill the car was €80 and that would last the bones of two weeks. €80 now and the dial is up about three quarters way to the top and would be lucky to get a week out of it.
All you motorists will have shed a tear or two going to the petrol station. And bloody diesel is about 10 cents more expensive than a litre of petrol. A litre of wine would be cheaper in some countries, and you can’t power the car on that. Although many do a good job of powering themselves on it. Based on the myenergi.ie website the average cost to charge an electric car from empty to full is €9.10. They say that the average monthly cost is about €36. The message is that it is more expensive to charge at a public charging point than a home charge.
Motor tax is €120 per year for a battery electric vehicle. There are fewer moving parts, filters, spark plugs etc so the cost of servicing should be lower. Check out the SEAI site to get more details on the savings
There is no Benefit in Kind [BIK] on an EV that cost up to €50,000 in 2022. This is the cost at first registration and is before the grant. Nil, nada, zilch BIK. What seems counterproductive is that this €50,000 reduces to €35,000 in 2023, €20,000 in 2024, and €10,000 in 2025. For an EV that costs more than €50,000 the employee is liable to BIK on the amount above €50k. That BIK cost will still be a lot less than if buying a petrol, diesel, or hybrid.
Ger did up some numbers. What was striking is that for an electric car that cost €40,000 in 2023 the BIK would be €94 per month. While the BIK on the same car in 2025 will be €563 per month or six times more expensive. Assuming a 52% tax rate the monthly cost is €49 in 2023 and €293 in 2025.
From a green policy point of view, it doesn’t make sense to reduce the incentive. Could the thinking be that we incentivise people now and we will collect the tax down the line? As in we get people to buy EV’s now and give them a break for a year or two and then recover the taxes.
Your company or business can get a tax write-off for the cost of the car in one year. For cars the write-off you get is a maximum of €24,000. For non EV’s this is over 8 years. But EVs will benefit from a tax deduction in the year you buy it. For a company paying that at 12.5% this is a saving of €3000 in year 1. With a sole trader, the saving can be up to 55% or €13200 in year one.
For more detailed calculations have a look at our blog – should my next car be electric
A new emissions-based system will come in in January 2023. Those who have cars with the lowest emissions in Class A will have the least BIK to pay. Class A is emissions of 0g/km up to and including 59g/km. The worst Class is E which is more than 179g/km. Low business kilometres is up to 26,000 per annum and the category A rate is 22.5% whereas the category E rate is 37.5%
Pablo Cartels Ltd buys a Hyundai Ioniq in early January 2023 for young Pablo for €45,000. He expects to drive 25,000 kilometres in 2023. Pablo’s BIK charge will be
€45,000 less €35,000 = €10,000 X 22.5% = €2,250 X 52% = 1170 or €98 per month
If it’s not an EV and we compare that to a car with a Class E emissions category the BIK will be
€45,000 x 37.5% = €16,875 x 52% = €8,775 or €731 per month
So, there is a double saving for Pablo. He’s getting a €35,000 deduction for having an EV and the benefit of the lowest emission category.
EVs must be a serious consideration for business owners that have cash and are looking to change cars. The spiralling costs of fuel and the improved range make this change more attractive. It’s a pity that the exemption reduces over the coming years but there are still annual savings. Given the lead in time, it will be the end of this year or next year when we can get our hands on one. We will be doing our bit for the environment and saving money too. Doesn’t Tramore look great in the picture!
We will get Ger numbers up on the Resources page of our site and if you need more information you can access the Revenue Guidance
Our clients talk to us about business decisions before they act. Want this type of relationship with your accountant? If so, start here