Tax

Are businesses making the most of EV incentives?

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Towards the end of 2023, the UK Government set out its mandate requiring all new cars and vans sold in the UK to be ‘zero emission’ by 2035 with stringent electric vehicle (EV) quotas on car manufacturers in the run-up to 2025.

This included the instruction that 80% of all new cars sold in the UK should be EVs by 2030.

The pathway, which came into effect from the start of this month, is intended to provide certainty to car manufacturers, confidence to investors putting their money into charging infrastructure, and time for families to begin making the switch to EVs. 

Although a devolved issue, the Department for Infrastructure intends that Northern Ireland will join the mandate in line with the rest of the UK when the Assembly is able to pass the relevant legislation.  

With some cost-saving schemes having been introduced by the Government to help lower the cost of owning an EV, it is likely that there are significant savings to be had by businesses investing in EVs either for their own purposes, or for their employees. 

With capital allowances of 100% available for new and unused zero emission or fully electric cars purchased prior to 31 March 2025, businesses can effectively write down the value of the car in full in its first year, deducting the full cost against their taxable business profits.

The same allowance also applies where businesses install workplace charging points for EVs.

The purchase of most vans and other commercial vehicles can benefit from full-expensing of these costs indefinitely, with the former 2026 deadline for full-expensing having been removed in the recent Autumn Statement. 

Particularly with the drive many businesses have towards becoming and being seen to be more sustainable and environmentally friendly, employers could consider operating a company car scheme that provides EVs to employees. 

Employees can sacrifice a proportion of their salary, upon which income tax, employer, and employee national insurance contributions are being paid, and they will instead be taxed on the benefit of having the car, at much lower rates.

The benefit in kind is calculated at 2% of the car’s list price until 2025, thereafter increasing by 1% each year until 2028, making EVs an attractive and cost-effective way to remunerate staff. 

There is also no taxable benefit for employees where businesses provide on-site charging points for staff to use to charge EVs, meaning employers can meet the electricity costs of their employees’ business and private motoring mileage at no cost to the employee.

With a number of company car scheme providers now having offerings that typically include a brand new car, charging point, servicing and maintenance, breakdown cover, and insurance, the option is likely to be an attractive one for rewarding staff.

Together with the favourable tax incentives for both the employer and employee, businesses could play a key part in helping the car industry to meet the Government’s zero emission target.

For further information or advice, Gemma Johnson can be contacted at Gemma.Johnson@ie.gt.com.

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