There are a number of tax incentives for both company car users and fleet operators who switch to electric vehicles.

With generous financial incentives available, ‘more and more businesses have either already made the switch or are giving serious consideration to doing so.

  • One in three UK fleet managers expect half of their company car fleet to be electric by 2025
  • Seven in 10 fleet managers are preparing to buy an electric car within two years
  • One third of the UK’s fleet managers expect more than 50% of their company car fleets will be electric within five years.

What financial incentives are available?

Benefits in kind

From April 2020, electric vehicles will attract zero tax on Benefit in Kind (BIK) during 2020 / 2021. This zero rate also applies to hybrid vehicles with emissions from 1 – 50g/km and a pure electric range of over 130 miles.

Salary sacrifice

Where an electric car is provided under salary sacrifice, the optional remuneration rules do not apply.

Tax bands for low emission vehicles

There are now 11 new tax bands for vehicles with emissions of 75g/km and below. The Government has also announced the tax rate for the next three years, helping businesses to plan ahead.

Capital allowances

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits.

Congestion charge exemptions

Electric vehicles are exempt from congestion charging and clean air zone (CAZ) charges.  In addition to London, five cities have been mandated by the Government to introduce a Clean Air Zone, including, Leeds, Birmingham, Nottingham, Derby and Southampton.

If your company vehicles travel into areas where clean air zones exist or are about to be introduced, there will be cost savings for your business if you switch to electric.

Road tax:

Because vehicle road tax is based on carbon dioxide emissions, pure electric cars are exempt from road tax.

Electric vans:

The taxable benefit for having the private use of a zero-emission van will be reduced to nil from April 2021. In 2020-21 electric vans will be taxed at 80% of the benefit for a normal van.

Government grants

The Government’s plug-in car grant provides 35% of the purchase price up to £3,000 towards the cost of an eligible plug-in vehicle costing less than £50,000.

The plug-in car grant applies at the time of purchase and is usually given as a discount off the purchase price of a vehicle.

The grant for electric vans is currently £8,000.

Electric charge points and charging costs

Any business that installs charging points for electric vehicles between now and 31 March 2023, can claim a 100% first year allowance for these costs.

If you would like further advice on the tax treatment of electric vehicles, please get in touch with the team at Thomas Coombs

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