The switch to electric vehicles is well underway, which spells good news for CO2 reduction and pollution in the UK. There are now more than 260,000 electric cars and 535,000 hybrid models on our roads.
The UK government is actively promoting the purchase of electric vehicles as part of its commitment to reach Net Zero by 2050. It has already announced that new petrol and diesel cars will no longer be sold in the UK by 2030.
In addition, the government has introduced incentives for both businesses and individuals to adopt electric cars and commercial vehicles.
Plug In Grants
A government scheme allows individuals to buy low-emission vehicles with a plug-in grant. The grant covers up to 35% of the purchase price for various vehicles, up to a maximum of £2,500. A list of the vehicles involved is available on this page. The grant is automatically applied to the purchase price when you visit a car dealer.
Vehicle tax breaks
Vehicle Excise Duty is calculated based on CO2 emissions, which makes electric vehicles exempt as they produce zero CO2.
For plug-in hybrid vehicles, owners pay tax in line with the level of CO2 produced – all the details are listed on the government website.
Electric vehicles are currently exempt from the additional £335 in vehicle tax for cars with a list price exceeding £40,000.
Company car tax breaks
A well-known drawback to company cars is that they often create more personal tax liability than they save in corporation tax. Employees who have company cars pay tax on company benefits (Benefit in Kind) of up to 37%.
But if the employee uses a purely electric company car, the Benefit in Kind rate is set at 1% in 2021/22, rising to 2% in 2022/23. This tax rate offers major savings compared with standard vehicles. To calculate your company car/fuel benefit, visit the HMRC website.
There is also a 1% Benefit in Kind charge for employees who drive fully electric vans and use them privately. The road tax on electric vans is zero.
If you’re looking into electric vans, tread carefully, as not all ‘vans’ qualify as such. Make sure that the vehicle you choose is eligible for tax breaks.
Benefits when driving in Central London
Electric vehicles are an attractive option for those who regularly drive in London, as zero-emission vehicles that meet specific criteria gain a 100% discount on the Congestion Charge. Clean Air zones are also in place in Bath, Birmingham and, from late 2021, Portsmouth. Some London boroughs free parking or discounted parking for electric vehicles.
To discuss ways you can benefit from tax cuts on electric vehicles, get in touch. Our accountancy services in the Lune Valley include personal and business tax planning. We’re trusted accountants for small businesses and individuals, and will be pleased to advise you.