The government's proposed ban on the sale of new petrol and diesel cars may have been pushed back to 2035, but it now includes all hybrid and plug-in hybrid cars.
The gradual shift over to EVs has already started. UK electric car sales increased by nearly 18% in 2023, and many organisations will want to consider EVs in the near future.
So, what are the key tax implications of shifting to electric vehicles?
- Capital Allowances: 100% First Year Allowances (FYAs) can be claimed on the purchase of new EVs. Sole traders/partnerships can claim in proportion to the time used for business.
- Charging points: 100% FYAs are also available on EV charging points.
- Personal Contract Purchase: PCP arrangements are usually deemed to be finance leases, and thus do not 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 employees of companies. Under salary sacrifice, the optional remuneration rules do not apply and employees can make savings on BiK rates, fuel and insurance.
- Mileage claims: If the business pays the lease or owns an EV that is charged at home, 10p per mile can be claimed 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.
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