Tax breaks and schemes for low-emission vehicles

Whether it’s due to environmental concerns, running costs or to be ULEZ compliant, lots of businesses are making the switch to electric or low emission vehicles. To help out, there are different tax breaks you claim, as well as a scrappage scheme for ULEZ affected businesses.

100% tax deduction

If you buy an asset that qualifies for “100% first year allowances”, you can deduct the full cost of a new car from your profits before tax. This tax break is primarily aimed at low emission vehicles or other investments aimed at reducing energy consumption.

The following qualify if they are new and unused:

• electric cars and cars with zero CO2 emissions
• plant and machinery for gas refuelling stations, for example storage tanks, pumps
• gas, biogas and hydrogen refuelling equipment
• zero-emission goods vehicles
• equipment for electric vehicle charging points
• plant and machinery for use in a freeport tax site, if you’re a company

All new electric cars qualify. If the vehicle is a low CO2 emitter it will depend on how much and the year it was bought. See more details on which cars qualify at gov.uk.

Annual investment allowance

Lorries, vans, trucks and motorcycles are not eligible for the 100% first year allowance. However, you may be able to claim annual investment allowance instead, of up to £1 million. 

ULEZ scrappage scheme

To help businesses adjust to the expansion of the Ultra Low Emission Zone (ULEZ) to all of London, the Mayor of London is offering an improved scrappage scheme. It’s available to sole traders and businesses up to 50 employees who meet the scheme’s criteria.

The van and minibus scrappage scheme offers six options:

• Scrap a van – £7,000 (previously £5,000)
• Scrap a minibus – £9,000 (previously £7,000)
• Retrofit a van – £6,000 (previously £5,000)
• Retrofit a minibus – £6,000 (previously £5,000)
• Scrap a van and replace with an electric van – £9,500 (previously £7,500)
• Scrap a minibus and replace with an electric minibus – £11,500 (previously £9,500)

Contract hire, hire purchase or other lease arrangements

Depending on the type of vehicle finance you use, your monthly repayments can also be deducted from your pre-tax profits. If your business is VAT registered, you can also claim back 100% of VAT on commercial vehicle rentals. 

Please check the details of your contract, speak to your provider or discuss it with a tax or financial advisor. 

How can we help with vehicle finance for businesses?

At Funding Circle we work with a range of finance providers who specialise in vehicle finance. Our team will help you find a provider to suit your needs, saving you time looking for a quote. 

Enter your details in our simple form and you could have a decision in as little as 1 hour. 

Information correct as of 15/09/23. While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.