The tax benefits of electric vehicles
The government’s design of the car tax regime is designed to discourage the use of high emission vehicles. So what are the tax benefits and is now the time to consider the move to zero or low-emission vehicles?
Percentages of list prices of company cars taxed as benefits are determined by the CO2 emissions of vehicles. For electric-only cars the current rate is just 1% of list price and there are also reductions for electric hybrids depending on their electric-only range and the date it was registered. The 1% zero emission rate will rise to 2% in April but has been set at that level until the 2024/25 tax year, potentially giving low Benefit in Kind charges.
The taxable benefit for having the private use of a zero-emission van reduced from April 2021 to nil.
From April 2021 businesses can claim 100% of the cost of a new and unused zero emission car against the profits of the year of purchase with no restrictions on the value of the vehicle. Where trading as a sole trader or through a partnership, this would be restricted by the proprietors’ private use.
Businesses can benefit from the new super-deduction, which currently offers 130% first-year allowance on qualifying electric charging points for cars (but not the car itself) and vans. To qualify for relief the company must use the charging point in their own business.
The government’s plug-in car grant provides grants of up to £2,500 towards the cost of an eligible plug-in vehicle costing less than £35,000 which is usually given as a discount off the purchase price of a vehicle.