Going green seems to be one of the most pressing issues the world is facing, second only to the COVID-19 pandemic. In this blog, we have collated information from different sources regarding the tax treatment and incentives offered to those who are planning to buy a low-emission or even zero-emission vehicle.
Low-emission vehicles eligible for a plug-in grant
As part of the UK government’s push for a more sustainable future, they are offering plug-in grants for brand new low-emission vehicles – including electric vehicles or EVs.
You do not need to do anything if you want to buy one of these vehicles – the dealer will include the value of the grant in the vehicle’s price.
That’s according to this article from the government’s website. Moving forward, here are other details that you need to know according to them:
Vehicles eligible for a grant
The amount of the grant depends on which category the vehicle is in. The 6 categories are:
- large vans and trucks
Not all low-emission vehicles will get a grant. Only vehicles that have been approved by the government are eligible for a grant so better check with your car dealership. To be eligible for the grant, cars must cost less than £50,000. This is the recommended retail price (RRP), and includes VAT and delivery fees.
The grant will pay for 35% of the purchase price for these vehicles, up to a maximum of £3,000.
Grant for a vehicle charger
You can get up to £350 (including VAT) off the cost of installing a charger at home through the Electric Vehicle Homecharge Scheme.
When done via a company
Where the employer pays for the cost of charging the company-provided electric vehicle there is no taxable fuel benefit for the driver, as electricity is not classified as a fuel for the car or van benefit regulations.
Where the driver of the electric vehicle pays for the electricity to power it, either from their domestic supply or by charging at a roadside station, the employer may reimburse the employee for that cost.
The article from ICAEW also lists the percentage of list price of a company car which is taxed as a benefit. For 2019/20 low emission cars (up to 50g/km) are taxed at 16% of list price, or 20% for diesels.
The tax year 2020/21 will be the sweet spot for buying an electric company car, when 100% FYA can be claimed by the purchaser and the employee will be taxed on only 2% of the vehicle’s list price.
A low or zero emission car can qualify for a 100% first year allowance (FYA) until 1 April or 5 April for income tax if:
- its CO2 emissions do not exceed 50g/km
- the car is purchased new and unused
Ultra Low Emission Zones
The London Congestion Charge is a daily charge for driving a vehicle within the charging zone in central London. As of 22nd June, the charge is now applied between 07:00 and 22:00, 7 days per week. The daily charge has also risen to £15 per day for an indefinite period. Currently, only vehicles that meet Euro 6 standards (petrol and diesel), that emit no more than 75g/km of CO2 and have a minimum 20 miles zero emission capable range will qualify for the 100% cleaner vehicle discount. From 25th October 2021, the cleaner vehicle discount will change so that only battery electric vehicles are eligible.
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