What tax help is available for electric car buyers?

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Carmakers are stepping up their campaign and seeking help from the government for themselves and their buyers.

The government has a water scarcity plan. After slow sales, automakers are demanding that a percentage of their cars run on batteries. And after Stellantis, owner of Vauxhall said it would close a plant in Luton because of the rules..

At least 22 per cent of cars built in British factories must be battery-powered, and a tenth of vans. Breaking the rules means either buying credits from competitors who are beating those targets – an unpopular option – or paying a fine of £15,000 per car.

But a lesser penalty can be agreed upon. To Give manufacturers and consumers more time to make the switch..

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This comes at a time when manufacturers are concerned about picking up the slack. Vehicles that are more expensive than petrol models but cheaper to run.

The price gap is gradually narrowing.But the cost of living, low wage growth and high borrowing costs are putting pressure on buyers.

Ford has announced 800 job cuts in Britain this month and other firms have warned of layoffs and cutbacks if the slowdown continues.

There are generous incentives for buyers of some electric cars. However, as you will see below, they are not as generous as they used to be, and the large sums of government money are not distributed equally.

Help tax now.

The biggest support comes for corporate buyers, which means you’ll need to perk up your employer to buy an electric car.

This should be possible for people who need a car to do their job – for example, people in sales who visit customers to conduct business. The need for a vehicle for travel cannot be a sufficient reason.

Businesses that buy the company’s electric cars get a capital allowance, meaning the cost of the vehicle can be set against its corporation tax bill. This does not work if the car is rented.

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Employees who use company car and keep it for personal use will also get tax benefit.

Getting a company car is considered a benefit by the government and is taxable. Electric cars are rated at just 2 percent of their value annually, compared with up to 37 percent for combustion engine vehicles, and that amount is then multiplied by a person’s tax band.

For example, a company car user with an electric car worth £35,700 with a rate of 2 per cent and an income tax band of 20 per cent would pay just £142.80 a year in tax to use their EV.

According to energy firm Octopus, a petrol car of the same price would cost £2,550, a diesel £2,641.80 and a hybrid £856.90.

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That 2 percent rate will increase each year, rising to 9 percent in 2029, but still below 19 percent for hybrid cars and up to 39 percent for combustion models.

As can be seen, these generous allowances are ideal for those who work for firms with a company car scheme or who run a limited company.

If you don’t, what’s on offer is much more limited.

The car industry is lobbying the government hard to increase support for those who do not have access to a car for work.

Tax relief now available is being phased out.

Electric cars will pay no road tax by April 2025. After that date, they will be taxed at par with petrol and diesel cars, albeit at a cheaper rate.

From April registered EVs will pay £10 road tax for the first year.

However, the £410 surcharge that cars worth more than £40,000 have to pay for five years has been waived for electric cars, and will continue.

Electric cars are also exempt from the congestion charge in London, although this perk will also end in 2025.

Other support available includes a £350 Transition Point Grant for renters and flat owners, which will run until March.

Future tax assistance

If sales of EVs continue to slow, the government may decide to help, as EV take-up is central to the UK’s decarbonising plans.

The Society of Motor Manufacturers and Traders has said that raising VAT on electric cars to 10 per cent could help encourage more drivers to make the switch.

Support that has already been terminated.

Two years ago the government scrapped its popular £300m grant scheme, which offered a £1,500 discount on electric cars worth under £32,000. About half a million buyers were helped by this scheme.