Tax Relief on Electric Vehicles

With the ban on the sale of new petrol and diesel vehicles from 2030 under the Green Plan, it may be the time to consider the move to electric vehicles. The tax reliefs and incentives outlined below are designed to encourage the use of low emission vehicles.

Benefits for Businesses

Capital Allowances

A low or zero emission car can qualify for 100% first year allowance (FYA) as long as its carbon dioxide emissions do not exceed 50g/km and the car is purchased new and unused, until 1st April 2021. This means that for electric cars you can deduct the full cost from pre-tax profits. Zero emission vans are entitled to a similar 100% FYA. From 1st April 2021, the 100% FYA only applies to zero emission cars.

Up to 31st March 2023, electric charge point installation can qualify for 100% FYA.

Benefit in Kind

Since 6th April 2020, electric vehicles are eligible for a 0% benefit in kind rate for the 2020/21 tax year. This will rise to 1% in 2021/22, 2% in 2022/23, and then remain at 2% until 2025.

Car Fuel Benefit Charge

Electricity is not classed as a road fuel which means that electric cars have no fuel benefit charge.

Benefits for All

Government Grants

There is a Plug-In grant which provides a discount on the price of new low-emission vehicles. The grant provides 35% of the purchase price of an eligible low-emission car, up to a maximum of £2,500. The car must cost less than £35,000 to be eligible.

There are also grants available for eligible motorcycles, mopeds, vans, taxis and large vans/trucks.

Through the Electric Vehicle Homecharge Scheme, you can get up to £350 (inclusive of VAT) deducted from the cost of installing a home charger.

Vehicle Excise Duty

Since April 2020, zero emission electric vehicles, with a list price exceeding £40,000, are exempt from the Vehicle Excise Duty (VED) ‘expensive car supplement’. This is in place until at least 31st March 2025.

London Congestion Charge

Zero emission vehicles that meet the criteria do not have to pay the London Congestion Charge, which is usually £15 per day.

If you would like further information or advice on the tax benefits of electric vehicles, please contact a member of our team.

The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice.  No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.

Written by
Nikki Stephenson
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