United Kingdom 
South Africa 
A push towards sustainability in recent years has led to a rise in popularity for electric vehicles (EV). But did you know that embracing electric cars for your UK business not only helps the environment but also offers significant financial advantages? We dive into the perks and tax benefits of purchasing an electric vehicle through your limited company as well as tips for how to spread the cost.
Corporation tax relief on electric cars and capital allowances
One of the biggest advantages to consider purchasing an electric car for your business is the tax relief available. Here are some of the incentives currently available
Corporation tax relief
If you purchase an electric vehicle using asset finance, you could enjoy some corporation tax relief. If you purchase the vehicle through hire purchase, you will retain ownership at the end of the agreement. This means that not only will you be able to claim up to 100% tax relief through capital allowances, you will also be able to claim on the interest you pay in your monthly repayments. This will mean that your business’ profits will be reduced, making you savings in corporation tax.
If you lease an electric vehicle used by your business, you won’t retain ownership of the vehicle, but you will still be able to claim the monthly rental payments, meaning you could also make savings on your corporation tax.
Historically, you couldn’t claim capital allowances on a leased vehicle. However in the UK’s Spring Budget 2024, Jeremy Hunt announced that full expensing would be extended to vehicle leasing as well. The legislation for this is yet to be published, but it is worth bearing in mind if you’re considering leasing an electric vehicle. You should speak with your accountant when considering finance to be clear on the current legislation and tax relief that applies.
Capital allowances
Currently, businesses can claim 100% tax relief in the first year if the electric car is bought outright or via hire purchase, making this highly advantageous.
If you buy an electric car after April 2021, the following applies:
- New and unused, CO2 emissions are 0g/km (or car is electric) = 100% first year allowances. This means you can deduct the entire cost of the vehicle from your taxable profits in the year of purchase.
- Second hand electric car = Main rate allowances apply, enabling you to claim 18% of the car’s value.
- New or second hand, CO2 emissions are 50g/km or less = Main rate allowances apply, enabling you to claim 18% of the car’s value.
- New or second hand, CO2 emissions are over 50g/km = Special rate allowances apply, enabling you to claim 6% of the car’s value against your taxable profits.
