• Evolve Team

What are the tax benefits of an electric vehicle for small businesses?

There’s a lot of talk of electric cars at the moment. Possibly mostly prompted by the fuel shortages from earlier this month, but actually the tide is generally turning away from fossil fuels and in favor of electric.


The environmental benefits of ditching dirty fuel are not exactly a secret anymore, anyone that passes a queue of traffic whilst walking or biking their kids to school will feel very aware of the level of pollutants in the car. Electric cars are not a perfect solution to our climate crisis, but they are part of a better solution for sure.


But let’s get back to business. It’s also ok to think about how switching to an electric vehicle might benefit your business too. Or rather how your business might benefit from the various incentives to switch to electric, that may not be around forever.





What Types Of Electric Vehicle Can I Buy For My Business?


OK, so now we can get a bit geeky and talk about lots of acronyms, so strap-in…


In levels of greenness (sort of):


Greenish: HEV - Hybrid


The clue is in the name here… hybrid vehicles have an electric battery and a combustion engine, so they are a hybrid of electric and standard vehicles.


They contain a fuel tank and a classic combustion engine along with an electric battery. The electric battery is charged using the combustion engine whilst on the move. But the main energy source is not really electric; it’s standard fossil fuel.


These cars can vary in how ‘electrified’ they are, some models making use of their battery more than others.


Greener: PHEV - Plug-In Hybrid Electric Vehicles


Plug-in Hybrid Electric Vehicles are cars that have both an electric battery and a combustion engine. The electric battery is recharged from a plug. PHEVs are similar to a Hybrid, but with a larger battery and electric motor. They have both a fuel tank and a charging port.


Greenest: BEV - Battery Electric Vehicles


Battery electric vehicles are powered solely by an electric battery, with no combustion engine parts or fuel tank. They are what we would call ‘fully electric’. They need to be recharged via an external plug or by regenerative braking (when your car slows down to recover energy, or something like that!) Most BEVs are capable of fast charging and overnight charging.


BEVs output zero emissions so are the darling of the current range of ‘greener vehicles’ but their range is quite limited. Then again… so is any car, it can only go until it runs out of fuel and then needs topping up, right?


BEV Brands on the Market


Here are a few of the BEV brands currently available on the market: Tesla (of course), Kia, MINI, Hyundai, Jaguar, Peugeot, Nissan, Skoda, Audi, Fiat, Ford, Porsche (Porsche!).


Almost every manufacturer is now offering a hybrid or fully electric vehicle, so we can be sure there will be soon much more choice available for consumers.



What Are The Costs Involved In Buying An Electric Car / Van / Bike?


Capital Expenditure


So buying the car itself is of course the biggest big cost. But see below om the tax benefits section for the current Super Deduction for Capital Expenditure tax benefits of taking the plunge if you have a Limited Company.


Some people will lease a vehicle, which is tax deductible as is the interest in financing too.


There is a government grant of up to £2,500 for low-emission vehicles. See more details in the tax benefits section below.


Charging Costs of Electric Vehicles


Currently the cheapest way to charge an electric car is at your home and overnight. It’s called a slow charge or an overnight charge. You’ll need a parking space and a charge point, which you normally can organise getting installed when you buy your car. Keep reading because we mention some government support for these costs later in the article.


According to the charging point company Pod Point, fully charging a 60kWh electric car will cost between £9.00 and £9.90 (depending on where you live) and give you about 200 miles of range.


The other way to charge your car is using public charge points, which are sometimes free as a short stay parking place. Or a rapid charge at a fuel station - the equivalent of tanking up on petrol/diesel when you are on the move. Most cars can regain about 80% of their range after a 30 minute rapid charge but it does vary a bit.


Pod Point suggests that rapid charging points are normally found at motorway service stations and typically cost £6.50 for a 30 min, ~90 mile charge.


There are also now many stores that offer free charging whilst you shop.



What Are The Tax Benefits Of An Electric Car / Van / Bike?


There are a lot of grants and tax incentives available to private individuals and businesses moving towards lower emissions vehicles. A lot of these benefits are heavily dependent on the emission output of the vehicle and in some cases only available on specific vehicles. So whilst we’ve tried to cover as much as possible in this article, it is designed as an overview and it is important that you check on the details of any specific purchase you make. Better yet speak to your accountant or us about it before you part with your cash!


Capital allowances


When your business buys equipment and vehicles you can claim capital allowances. This can mean either claiming the full cost of the purchase of the item against profits or a percentage of the cost each year until the balance is zero. Usually when purchasing a car (rather than a van) the full 100% of the cost cannot be claimed and instead a small percentage is claimed each year. However if you buy an electric car you can claim the full cost of the vehicle against that year’s profits which can significantly reduce your tax bill for that year.


If you have a Limited Company you also get the Super Deduction for Capital Expenditure on the purchase of a new electric vehicle. That means you can reduce 130% of the cost of an electric vehicle from your profit to reduce your corporation tax bill.


If you are thinking about changing your car or van for business, then now is a prudent time to do so in order to maximize your tax benefits. The super deduction tax benefit is only valid until 31st March 2023.


Low Emissions Vehicle Plug-In Grant


This is a wordy way of saying that the government will give you a grant of up to £2,500 to purchase a low-emission vehicle for private or business use.


The grant is paid directly to the dealership wherever you purchase your vehicle from and is therefore taken directly from the price of the car. There is a detailed list of eligible vehicles (which is surprisingly comprehensive) and you can find more details about the Low Emissions Vehicle Plug-In Grant on the government website.


Benefit in Kind Tax


The benefit in kind tax rate for electric vehicles is currently only 1% rising to 2% from April 2022 to April 2025 (compared to 30% for higher emissions vehicles). So a low emissions vehicle for your business that you also share for personal use is probably a great choice right now.


Other Tax Benefits of Low Emissions Vehicles


No vehicle excise duty

No van benefit charge

No fuel benefit charge

No fuel duty


Congestion Charges


Electric cars are exempt from congestion charges. The Ultra Low Emission Zone (ULEZ) charge in London is currently a whopping £15 per day in London, which is a pretty deal.


Travel Costs


If you buy an electric vehicle personally you can still claim 45p/25p per mile if you use it for business even though the actual cost of an electric vehicle is more like 4p per mile. We can’t help but think this might be changed at some point to reflect the actual running cost of electric vehicles in the future so make hay while the sun shines!


Road Tax


Road tax is now based on emissions so there is a real incentive to find the vehicle with the lowest output.



Government Grants for Charging Infrastructure


Electric Vehicle Homecharge Scheme


The Electric Vehicle Homecharge Scheme (EVHS) provides grant funding of up to 75% towards the cost of installing electric vehicle charge points at domestic properties across the UK.


Are There Workplace Schemes For Electric Cars?


Yes! The Workplace Charging Scheme (WCS) is a voucher-based scheme that provides support towards the up-front costs of the purchase and installation of electric vehicle charge-points, for eligible businesses, charities and public sector organisations.

So if want to offer electric charging stations at work, then you can apply for vouchers using the Workplace Charging Scheme application form. If the primary use of the property is residential (ie you work from home) then you can apply for a grant under EVHS instead (see above point).



Is An Electric Car Right For Me And My Business?


This is a tough question to answer because we would not really suggest anyone runs around spending money ‘just’ to get a tax break or a government grant. However, if a new vehicle purchase is on the horizon for you in the near future then it makes absolute sense to take advantage of incentives while they are around.


Now is specifically an electric vehicle right for you? Well to answer that question I think we can only advise you to look at the pros and cons and decide for yourself.


Advantages of an Electric Vehicle

  • Nice to drive

  • Lower running costs

  • Better for the environmental

  • Government incentives/ tax breaks

  • Holds resale value

  • No problems during a fuel shortage


Disadvantages of an Electric Vehicle

  • Initial purchase cost may be higher

  • Charging needs to be point installed at home

  • Range of travel still a bit limited

Ultimately, I think we all know that the age of fossil fuels is over and the change to electric vehicles is coming fast. It’s a matter of keeping a close eye on the technology advancements, the tax incentives and the options for charging.


It’s all happening, it’s just a matter of jumping in at the right time for you! If you need some helping making the right decision for your business, get in touch with us.


☎️TEL: 01480 775 611

💻www.evolveaccounting.uk

📧hello@evolveaccounting.uk