Why electric car leasing is perfect for a Locum Doctor with a limited company

A Locum doctor with a limited company - Why electric car leasing is a perfect solution

The growth of EVs is none more noticeable than in 2023, where we have witnessed considerable uptake in both the new and used green sector. In the used-car industry, as at November 2023 the sales have increased some 99.9%, with zero-emission technology now recording nearly a 2% market share according to SMMT .

And the success of the used industry is ultimately created, and funded, by the new car industry which supplies a healthy volume of 2, 3 and 4 year old vehicles for UK customers to enjoy. While conjecture and media may have tried to disrupt this, the evidence is that more new EVs will enter the UK with the upcoming ZEV Mandate about to be pushed through into legalisation during November / December 2023 after significant consultation .

This legal, and social, legislation will be a key driver in the UK’s all-electric transition ambitions, with support and investment set to impact different aspects of the industry.

Not only that, vehicle manufacturers will have to ensure a certain percentage of their product is zero-emission, with the target date of 2035 being the target for ending all non-zero emission transport being sold in the UK (while this will mainly be achieved via electric technology, we may also see Hydrogen options too).

At grassroots, all of this is influencing a multitude of industries, who can benefit from some significant advantages in forming part of this change. The medical profession is one key industry which the e-car lease team work very closely with.

For NHS doctors who are employed, many are enjoying electric cars via the robust NHS salary sacrifice scheme but that is something different to which we are discussing here. Many doctors working for the NHS, or agency, will instead use contract hire and leasing to procure brand new cars. And for those who have set up a limited company, our definitive guide to company cars provides an enhanced overview about the crux of this procurement route .

In brief, many locum doctors benefit from 1) a separate legal entity for protecting personal assets; and 2) a more tax-efficient method for managing their income. With corporation tax now at 25%  this means that should your company make a profit of £250,000 or more, you will pay this main rate.

However, for those companies with profit of £50,000 (or less) you will only pay the small profit rate of 19%. Bearing in mind that the corporation tax is only applied to profit, not your revenue / income, this allows Drs to utilise tax-efficient strategies to enjoy certain assets, which they would otherwise need, and which reduces their corporation tax.

Additionally, a limited company can offer a more tax efficient way of drawing income compared to an employed or self-employed situation where personal allowance is taxed at 20%, 40% and 45%. Using a combination of salary with dividend can present a far better position. However, speak to your accountant about the pros and cons of using a limited company as a locum doctor, as there are higher accounting and tax submission requirements.

So why electric cars for your limited company?

As disclosed above, you can utilise the company to procure certain assets and that includes a car. Rather than use money which you have paid income tax on, your company can pay the finance or rentals on a vehicle and these amounts can be offset against your profits (which are subject to corporation tax).

For any contract hire and leasing products, so long as your vehicle emits less than 51g/km of CO2, then 100% of the monthly rentals are allowable against tax. For more polluting vehicles, only 85% of this sum can be applied against tax.

Not only that, with aspects like servicing and maintenance, insurance and charge points also being tax deductible, you can use the company to manage these expenditures. But there is some tax exposure for the company car driver, whether they be the only employee / director / shareholder of the business.

When you enjoy the car via your limited company you must pay company car tax and this is calculated in accordance with the vehicle’s P11d (list price including Vat delivery and options BUT excluding first reg fee and road fund licence), the vehicle’s emissions (shown as g/km) and your own income tax bracket.

The more expensive and polluting the car is, the higher tax exposure will be. Because an electric car emits 0g/km, there will only be a 2% BiK band until 2023/24 increasing by 1% per year thereafter. But this is still a considerable tax saving compared to a petrol or diesel combustion option, which can sit at 20-30%!

Why lease your company car?

By its very nature, leasing is a usership agreement which allows you to utilise an EV for a predetermined amount of time and then hand it back. There is no risk of depreciation nor is there a disposal risk at the end. Ultimately, the EV is collected by your nominated finance company and sold at auction.

And with contract hire you can include all service and maintenance, so that the fleet aspects are effectively managed for you - servicing, tyres and breakdown. Essentially you just need to fuel and insure the vehicle. At e-car lease, our amazing “living with your …” tools, plus our EVC™, introduces you to companies that can insure your company car, install a charge point and also provide you with a charge point location service. These are niche services we add to the all-electric experience for our business and fleet customers.

But is contract hire the only route?

While the majority of the transactions we carry out are based on this method, owner-managed companies, like locum doctors with a limited company, are benefitting from a truly outstanding tax benefit which Contract Purchase (BCP) allows.

As we detailed in a recent guide to BCP , this like-for-like alternative to a PCP, enables the limited company to accelerate their tax benefits by offsetting the capital cost of the vehicle PLUS the interest against corporation tax for that year. For any limited companies procuring more expensive vehicles, which many EVs are, this can vastly reduce their corporation tax exposure of 25% (or 19%) as noted earlier in this guidance.

In contrast, contract hire and leasing only allows you to offset those monthly rentals you have made in that financial year. Another pro of BCP is that you are able to purchase the EV for an agreed price at contract end. Unlike contract hire where the vehicle is returned, the BCP method gives more flexibility and choice in that you can either purchase, sell or return the EV at contract cessation. Again, speak to your accountant first about the tax implications. 

In terms of the car shown, the Skoda ENYAQ IV ESTATE 150kW 80 Sportline Plus 82kWh 5dr Auto Pure Electric Vehicle, this is based on the following configuration:

•  Metallic Paint - Black Magic
• SportLine design pack - Black Microsuede/leather with grey piping
•  20" Vega anthracite metallic alloy wheels
•  6m mode 3 cable (32A) 

How good is the Skoda Enyaq Estate?

This RWD hatch will have a 77 kWh usable battery which will offer 0 – 62 times of 8.6 seconds, 99 mph top speeds and 150 kW (or 201hp). Expect a combined winter range of 230 miles with warmer weather allowing for 310 miles.

On charging, the 11 kW AC max will allow 8 hour and 15 minute  0 – 100% charging times with the 143 kW DC maximum allowing 27 minute 10 – 80% times. A cargo volume of 585L is available with this car. It has a vehicle fuel equivalent of 142mpg. This EV will have no Bidirectional charging. And the car will be able to tow 750kg (unbraked) and 1000kg (braked).