Showing renewed commitment to promoting electric vehicles over petrol, diesel and hybrid models, the Government has extended the 100% first year allowance for zero-emission cars.
Businesses and individuals can continue to deduct the full cost of zero-emission vehicles and electric vehicle charge-points from their taxable profits until 31 March 2026 for corporation tax and 5 April 2026 for income tax.
Where a business provides a company car to an employee there will be a benefits-in-kind tax charge based on the emissions of the vehicle. The appropriate percentages for 2028-29 and 2029-30 have now been set with significant increases across the board. The largest increase is levied on hybrid models, widening the gap between hybrid and fully electric vehicles for tax purposes.
The appropriate percentage for vehicles with zero emissions will increase by two percentage points per year to 7% in 2028-29 and 9% in 2029-30.
Currently, there is a sliding scale for hybrid vehicles with the appropriate percentage increasing as the electric range reduces. From 2028-29 there will be one rate applied to all hybrid and other vehicles producing 1g to 50g CO2 per km, regardless of the electric range. This will be 18% for 2028-29 and 19% for 2029-30.
For all other emission bands the rate will increase by one percentage point per year to maximums of 38% and 39% for 2028-29 and 2029-30 respectively.
Fuel benefits for cars and vans and the flat rate benefit charge on a company van will increase in line with the September 2024 consumer prices index with effect from 6 April 2025.
For more information on this contact our expert Graeme Fox on graeme.fox@hhllp.co.uk.
