Electric vehicles: Grants and tax benefits for small businesses

Electric vehicles: Grants and tax benefits for small businesses

Transport is responsible for around a third of total CO2 emissions, so it’s little surprise that electric vehicles feature heavily in most government’s net zero emissions plans.

Switching from fossil fuel to battery-powered electric vehicles is a tangible way for small and medium-sized enterprises (SMEs) to reduce their carbon footprint.

In fact, a 2020 study by three universities (Exeter, Nijmegen (Netherlands), and Cambridge) found that in 95% of the world, driving an electric car is better for the climate than a petrol one.

Therefore, if more small businesses – which employ more than 16 million people in the UK – adopt electric vehicle (EV) technology, it could have a significant positive impact for the environment, as well as contribute to companies becoming carbon neutral overall.

What’s more, the government has introduced new incentives to help SMEs manage the upfront costs, so they can reap the longer-term carbon and monetary savings.

Here’s what we cover in this article:

Subsidies and tax breaks

Lower running costs

Learning by example: Moving to electric vehicle use

Subsidies and tax breaks

The initial cost of transitioning from fossil fuel to electric vehicles can be off-putting, but there are several grants and subsidies that can help your business manage the initial outlay, as well as several tax breaks that mean the technology is often more cost-effective in the long-term.

The Workplace Charging Scheme (WCS)

If your business is eligible, this voucher-based scheme can help with the upfront costs of the purchase and installation of EV charge points.

It’s limited to 75% for each socket, up to a maximum of £350 and 40 sockets across all sites per applicant. Vouchers can only be redeemed by approved providers.

To be eligible, your business needs to be able to show that it:

  • Is a registered business or VAT registered.
  • Can declare a need for electric vehicle charging equipment or an intent to encourage uptake among their staff and/or fleet.
  • Has dedicated off-street parking for staff and/or fleets.
  • Owns the property where the charge points will go or have consent for installation.

The UK Plug in Car Grant

Grants are also available for the purchase of qualifying electric vehicles through the plug-in car grant.

Businesses and individuals can get £2,500 off the price of an EV costing no more than £35,000; this was recently cut from £3,000 off the price of an EV costing up to £50,000.

Grants of up to £3,000 for vans and £6,000 for large vans are also available.

Benefit in Kind tax breaks

Employees can make considerable saving when their employer opts to invest in low emissions vehicles.

Company vehicles that are fully electric pay benefit in kind (BIK) tax rates of only 1% in the current 2021/22 tax yeare; this will rise to 2% in 2022/23.

This offers huge savings.

For example, in the 2021/22 tax year, the BIK per year for the e-Golf is £55.20 a year, whereas a Golf GT Petrol 1.5 is £1,392.

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances.

This means with electric cars, companies can deduct the full cost from their pre-tax profits.

They’re also exempt from the London Congestion Charge (until April 2024) and road tax, also known as Vehicle Excise Duty (VED).

It’s worth noting that despite the fact there’s no road tax to pay for electric vehicles, you still need to go to the DVLA website (or make a phone call) to tax your vehicle.

Lower running costs

Electric cars are much cheaper to run than their petrol and diesel counterparts.

The average electricity costs to power a Nissan LEAF is around 3.9p per mile, compared to an average of 9.2p per mile on a petrol or diesel Ford Fiesta.

What’s more, if companies invest in solar panels on their buildings, they can essentially charge vehicles, in part, for no extra cost and offer access to this infrastructure as a free perk to EV-owning employees.

Stockport-based schoolwear supplier One+All is doing just this. The firm offers employees free car charging, powered by installed rooftop solar panels, while they’re at work.

“We want to try and incentivize people to personally make the switch to electric vehicles, as a when they’re able to,” says Chris Rowlinson, director at One+All.

Learning by example: Moving to electric vehicle use

One+All started its decarbonisation journey three years ago and is now certified carbon neutral by the Carbon Neutral global standard.

The company was using diesel vehicles but switched to full electric and hybrid, where it was not practical for full battery power due to mileage and lack of charging infrastructure, a few years ago.

Rowlinson says the move hasn’t required the company to increase its budget per car and has, overall, provided major benefits for employees.

“There’s no reason EVs should be more expensive on a like-for-like basis, but the amount of tax paid on them is negligible, you can save literally hundreds of pounds a month,” he explains.

Similarly, York Gin, a small gin distillery based in York, has recently invested in a fleet of three – soon to be four – electric, emission-free vehicles powered by renewable energy supplied by Good Energy.

Emma Godivala, director at the company, says when they started the switch in 2018 infrastructure was less ubiquitous. But this, and the technology, has improved over the years and the costs have come down.

“However, it’s not just a straight up cost of the vehicle equation, but the cost to the planet; you’ve got to think of the full spectrum,” says Godivala.

Her advice to companies considering adopting electric vehicles is to: “Lobby local MPs to make sure the infrastructure is there, order early because there is a time delay for delivery of the technology, and remember it really works for your customers, people feel better about emissions free products and are willing to pay a bit more for them.”

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