Tax relief on ultra-low emission and electric vehicles

02.10.2019
Mary Schofield
Tax

If you are considering the purchase of a new car for your business then you may want to think about the benefits of an electric or ultra-low emissions vehicle (ULEVs).

100% tax relief
Until April 2021, new electric cars and low-emission hybrids can qualify for 100% tax relief in the year of purchase. Typically, a new car will only receive a writing down allowance of 18% or 6% per annum on a reducing basis. This means it can take several years to claim the tax relief.

Additionally, if you purchase an electric vehicle charge point, this will also qualify for a first year allowance providing 100% tax relief in the first year of purchase.

Benefits in kind
If a company car is provided for use by a director or employee then a benefit in kind (BIK) charge may arise.

Lower BIK charges will apply to ULEVs, resulting in a lower tax charge for the employee as well as lower National Insurance for the employer. For 2019/20 the BIK on vehicles with a zero C02 emission is calculated as 16% of the list price. This will drop to 0% in 2020/21. Where the CO2 emissions are between 1-50 g/km, the benefit in kind percentage varies depending on when the car was first registered (pre or post April 2020), and the electric range in miles.

There is no BIK charge on employees charging their company car at work.

Salary sacrifice

ULEVs are able to be offered on salary sacrifice schemes, thus reducing tax charges for employers and employees.  

If you have any questions

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