As businesses look for ways to optimise their finances and reduce expenses, adopting electric vehicles (EVs) presents a compelling financial opportunity. 

With a range of government incentives, tax reliefs, and cost-saving benefits, businesses can significantly improve their bottom line by making the switch.

Let’s take a deeper look.

Tax Benefits for Businesses Switching to EVs

1. Benefit-in-Kind (BiK) Tax Savings

Company car tax, also known as Benefit-in-Kind (BiK) tax, is significantly lower for electric vehicles compared to petrol or diesel vehicles. 

The current BiK rate for EVs stands at just 2%, remaining in place until April 2025. In contrast, petrol and diesel vehicles can attract BiK rates as high as 25% or more.

For example, if a business provides an employee with an EV valued at £40,000:

• A 20% taxpayer would pay just £160 per year in BiK tax.
• A 40% taxpayer would pay £320 per year.

Even with planned annual increases of 1% from 2025/26 to 2027/28 (reaching 5%), EVs will still remain far more tax-efficient than traditional vehicles.

2. 100% First-Year Allowance (FYA)

Businesses purchasing new, fully electric cars can benefit from a 100% first-year capital allowance. This means that the full cost of the EV can be deducted from taxable profits in the year of purchase, significantly reducing the company’s tax bill.

3. Capital Allowances for EV Charging Points

Businesses investing in EV infrastructure can also claim capital allowances on the cost of installing EV charging points at their premises. This further reduces taxable profits.

Financial Benefits of EV Adoption

1. Lower Operating Costs

One of the most immediate benefits of switching to EVs is the significant reduction in operating costs:

• Fuel Savings: Electricity is cheaper than petrol or diesel, especially with workplace charging solutions.
• Lower Maintenance Costs: EVs have fewer moving parts, reducing the need for servicing and expensive repairs. There are no oil changes, exhaust repairs, or complex engine maintenance requirements.

2. Congestion Charge and Clean Air Zone Exemptions

Many UK cities, including London, Oxford, and Birmingham, have introduced Clean Air Zones (CAZ) and congestion charges. Electric vehicles are exempt from these charges, offering substantial savings for businesses operating in these areas.

• The London Congestion Charge (currently £15 per day) exemption for EVs will remain in place until 2025.

For a business with two company vehicles operating in London daily, this could equate to savings of over £7,800 per year.

3. Government Grants for Charging Points

While the Plug-in Car Grant for cars has ended, businesses can still access the Workplace Charging Scheme grant. This scheme covers 75% of the cost (up to £350 per socket) for installing EV charging points, reducing infrastructure investment costs.

Strategic Business Advantages of EV Adoption

1. Improved Cash Flow and Profitability

Lower fuel, maintenance, and tax costs translate to improved cash flow and profitability for businesses. Companies can then reinvest these savings into growth initiatives.

2. Attractive Employee Benefits

Providing EVs as company cars can be an attractive perk for employees, boosting morale and retention while offering them significant tax savings. Employees using EVs pay lower BiK rates, leading to increased take-home pay.

3. Preparing for Future Legislation

The UK government has set ambitious targets for reducing carbon emissions, including a ban on new petrol and diesel car sales from 2030. Businesses transitioning to EVs now will be ahead of regulatory changes, avoiding costly future compliance adjustments.

How Accountants in Crawley Can Help Your Business Transition to EVs

At Curve Accountancy, one of our favourite things is helping businesses identify tax-efficient opportunities, that includes the adoption of EVs if you’re interested in taking the leap. 

Our team can assist with:

• Understanding BiK tax advantages for company cars.
• Claiming first-year allowances for EV purchases.
• Maximising capital allowances for EV charging infrastructure.
• Advising on tax-efficient fleet management strategies.

If you're a business owner looking to maximise your savings, get in touch with Curve Accountancy, your trusted accountants in Crawley, for some expert guidance. 

Final Thoughts

The financial benefits of adopting EVs are clear: lower taxes, reduced running costs, and significant government incentives. 

Whether you're a small business owner or managing a large fleet, transitioning to electric vehicles could bring immediate and long-term savings.

If you're ready to explore how EV adoption can benefit your business, get in touch with Curve Accountancy today. 

As one of the most experienced accountants in Crawley, we help businesses like yours take advantage of tax breaks and cost-saving strategies every single day.