Now that we’ve entered into a new tax year, businesses should start thinking about ways to extract cash from their business. There are several ways to do this, including lowering your salary and taking dividends, but this article will focus on purchasing electric vehicles with the UK Government’s plug-in grant.
The Government is offering a variety of grants making it more affordable to purchase an electric vehicle, and to help businesses keep more of their hard earned cash.
What is the plug-in grant?
The plug-in grant has been around for several years as an incentive to purchase electric vehicles to curb climate change. The grant has been modified many times, but it currently offers £2,500 off of eligible low-emission cars and up to £16,000 for larger vehicles.
You do not need to apply for the grant. The car dealer will include the grant in the vehicle’s price if it is eligible.
Which vehicles are eligible for the grant?
Only low-emission vehicles that are approved by the government will be eligible for the plug-in grant. The eligible vehicles are divided into 7 categories:
- Cars: CO2 emissions of less than 50g/km and can travel at least 112km with zero emissions. The car must cost less than £35,000 and be on the list of government approved vehicles. The grant will pay for 35% of the car price up to £2,500.
- Motorcycles: Zero CO2 emissions and can travel at least 50km between charges. The grant will cover 20% of the motorcycle price up to £1,500.
- Mopeds: Zero CO2 emissions and can travel at least 30km between charges. The grant will cover 20% of the moped price up to £1,500.
- Small vans: Vehicles less than 2,500 kg with CO2 emissions of less than 50g/km, and can travel at least 96km with zero emissions. The grant will pay for 35% of the van price up to £3,000.
- Large vans: Vehicles between 2,500kg and 3,500kg with CO2 emissions of less than 50g/km and can travel at least 96km with zero emissions. The grant will pay for 35% of the van price up to £6,000.
- Taxis: Purpose-built taxis with CO2 emissions of less than 50g/km and can travel at least 112km with zero emissions. The grant will cover 20% of the taxi price up to £7,500.
- Trucks: Vehicles between 3,500kg and 12,000kg in weight with CO2 emissions of at least 50% less than an equivalent standard truck. They must be able to travel at least 96km without any emissions. The grant will cover 20% of the purchase price, up to a maximum of £16,000.
A full list of government-approved electric vehicles can be found on the UK Government website.
Grants for vehicle charging points
In addition to the plug-in grant, you can also receive up to £350 towards the cost of a vehicle charging point. The Electric Vehicle Homecharge Scheme (EVHS) provides up to 75% of the installation cost on domestic properties in the UK.
There is also the Workplace Charging Scheme (WCS) which is a voucher based scheme that provides support to businesses who install vehicle charging points.
Both grants need to be applied for from the government’s website.
Tax benefits of going electric
If your limited company purchases an electric car, you can offset some of the cost against your corporation tax. With standard cars, the deduction is applied gradually, however, with electric cars, the deduction is applied in full on the year you made the purchase.
If your business purchases an electric car and it is also used for personal trips, the car will be seen as a benefit in kind and taxes would need to be paid on its value. However, the Government introduced tax exemptions on low emission vehicles.
From April 2021, the benefit in kind rate for vehicles with less than 50 g/km CO2 emissions will be only 1%. Comparably, the BIK rate for a standard petrol car is up to 37%. From 2022 to 2024, the rate for electric cars will be 2%.
Summary
Purchasing an electric vehicle has never been cheaper. There are several grants available set by the UK Government to curb climate change. Grants are available for the cost of the electric vehicle as well as the installation of charging stations.
Choosing an electric company car over a standard petrol car can also decrease the amount you pay in tax. With a cut in benefit in kind rates, as well as a corporation tax deduction, buying an electric car can be more affordable than less environmentally friendly counterparts.
