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Considering An Electric Vehicle? Here Are The Tax Implications...

The government's plan to prohibit the sale of new petrol and diesel cars may have been delayed until 2035, but it now encompasses all hybrid and plug-in hybrid vehicles. The transition to electric vehicles (EVs) is already underway. Electric car sales in the UK rose by almost 18% in 2023, prompting many to contemplate adopting EVs soon.



WHAT'S UNDERWAY?

  • Capital Allowances: When an EV is purchased, 100% First Year Allowances (FYAs) can be claimed. Sole traders/partnerships can also claim in proportion to the time used for business.

  • Charging points: 100% FYAs can be available on EV charging points.

  • Personal Contract Purchase: PCP arrangements are typically considered to be finance leases. They don’t qualify for FYAs.

  • Leasing: Leasing allows a business to spread the cost, while still deducting that cost from taxable profits (in proportion to the business use for sole traders/partnerships).

  • Benefit in Kind: Personal usage of EVs is charged as a BiK at a rate of 2% (until April 2025) for company employees. Optional remuneration rules don’t apply under salary sacrifice. Employees can make savings on: BiK rates, insurance, fuel. 

  • Mileage claims: If the business pays the lease or owns an EV (that’s charged at home), they can claim 10p per mile for business journeys.

  • Electricity claims: There is no taxable benefit if a company gives employees charge cards for public chargers, repays what is spent using those, or reimburses the actual cost of the electricity used for charging a company car at home.


The article outlines just some of the details regarding electric vehicles and tax. It does not represent financial advice. If you would like personalised financial advice, please contact a financial adviser.



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