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Electric and Hybrid vehicle lease tax benefits

With the government intending to ban petrol and diesel cars by 2040 – (tax) incentives have been made available to motorists to make the move to electric and hybrid vehicles.

The below fact sheet shows the tax benefits available to personal and business ultra-low emission vehicle users.

Available to all ULEV users:

All plug-in electric vehicles also known as the full-hybrid are exempt from fuel duty

Vehicle Excise Duty (VED) – Zero emission vehicles valued less than £40k are exempt from VED

VAT – electricity used to recharge a plug-in vehicle is only charged 5% VAT, much lower than 20% VAT on Road Fuels

Available to business users:

Taxation of company cars (CCT) – currently Ultra Low Emission Vehicles (ULEVs) are categorised in two bands for CCT (0-50g/km and 51-75g/km) These bands are charged at a lower rate based on their list price than vehicles with higher e-missions. In 2020-21 – these bands will be further split on zero-emission mileage distance

Tax Benefit in Kind – if an employee chooses a ULEV under a salary sacrifice scheme, benefit in kind will be applied through Income Tax and National Insurance

Van Benefit Charge – in 2017/18, benefit charge for zero emission vans will be 205 of the main rate. This will then increase on a tapered basis, reaching parity with the main rate in April 2022.

Enhanced Capital Allowances (ECAs) - business that purchase or lease vehicles which emit less than 75g CO2 /km, zero emission goods vehicles, or ULEV recharging or refuelling infrastructure, are eligible for 100% first year allowance.

Approved Mileage Allowance Payment (AMAPs) – regulation is the same for electric and plug vehicles and member of staff can claim 45p per mile (under 10.000 miles a year) and 25p per mile (over 10.000 miles a year) – AMAPs can also be used if you have a limited company and use your private vehicle for business purposes