Could the extended tax break for green motoring be the incentive you need?

Zero-emission cars can now be spotted everywhere, as can electric vehicle (EV) charging points, found in towns and cities all across the UK. The government is supporting the green car sector financially – it is contributing to the recently-announced £100 million investment to build electric cars and vans at Vauxhall’s Ellesmere Port factory – and has also shown its commitment by extending the tax break for zero-emission vehicles. The four-year extension also relates to equipment, such as EV charging points too. So, could it be time to buy green?

The green motoring tax break, broken down

It is a capital allowances (CAs) tax break that will now run until 2025 and apply to qualifying environmentally-friendly cars/other vehicles, also related equipment.

New and unused zero-emission cars, new and unused zero-emission goods vehicles, and EV charging points or gas refuelling equipment will qualify, if the expenditure was incurred before 31 March 2025 (for companies), 5 April 2025 (for incorporated businesses). 

The expenditure will qualify for first year allowances (FYAs), with a CAs tax deduction of 100%, for the accounting period in which it was incurred. When claiming FYAs for a green vehicle/related equipment, there will be a box on your tax return for you to complete – so don’t include it with other qualifying expenditures. 

What about the annual investment allowance (AIA)? Isn’t that a similar form of tax relief?

The AIA is enough to cover any expenditure for most small to medium-sized businesses; however, it excludes cars and is set to be reduced to £200,000 from 1 January 2022 (it is currently set at £1 million). So, if your accounting period spans 31 December, claim your FYAs to avoid any complications with the new AIA rules. If you clearly identify FYAs-qualifying purchases from other purchases for which CAs can be claimed, you can avoid using any of your reduced AIA allowance (save it for tax relief on other purchases).

If the extended tax break for green vehicles is finally tempting you, there are some great models to choose from – and there is clearly confidence in this industry. To discuss any tax savings from green motoring in greater depth, get in touch.

For help with business or personal tax planning, call Figurit (formerly known as Lansdell & Rose) on 020 7376 933 or complete the form below.

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