Government incentives for buying secondhand EVs

If you’re thinking about investing in used electric vehicles (EVs) for your business, and you’re based in the UK, you could be in luck. There are lots of government backed, used EV incentives available, designed to make going electric easier and more affordable for you and your employees.

What are the Government incentives for used EVs?

If you’re considering buying EVs, new or used, there’s even more good news. The UK government has confirmed EV tax benefits for electric vehicles all the way up to 2028. 

Capital allowances. 

In the UK, businesses that purchase electric vehicles (EVs) may be eligible for tax relief. The government offers capital allowances you can claim back on company cars you buy and use in your business. It means you can deduct part of the vehicle's value from your profits before tax. The allowance rate will depend on when the vehicle was bought and its CO2 emissions.

As of 2021, brand new fully electric cars have a 100% first-year capital allowance, meaning you can deduct the full cost of the car. This only applies to new cars with zero CO2 emissions. 

Second-hand electric cars can claim the main rate of capital allowance (18%). This rate also applies to new or second-hand cars with CO2 emissions of 50g/km or less, such as some plug-in hybrids. 

Special rate allowances (6%) apply to cars with CO2 emissions over 50g/km, which includes most petrol, diesel, and traditional hybrid cars. 

Different rates apply to cars bought in earlier periods.

Benefit-in-kind.

Benefit-in-kind (BiK) rates are the rates used to calculate the amount of tax an employee owes on benefits they receive from their employer alongside their salary. These benefits typically include things like company cars and private healthcare, and are used to attract and retain top talent to your business.

EVs enjoy significantly lower BiK tax rates than petrol and diesel cars, making them a particularly attractive benefit package option. The BiK rate for EVs for the 2023/24 tax year is just 2%, and this will remain in place until April 2025. After that, it will increase by 1% each year for the next three years, until it reaches 5% in 2027/28. Higher-emission (petrol and diesel) vehicles can face BiK tax rates of up to 37%.

BiK tax is calculated based on a number of factors:

• P11D value. This is basically the list price, including VAT and delivery charges, but excluding the first year's registration fee and road tax.

• CO2 emissions. EVs have zero tailpipe emissions, a big part of why they have the lowest BiK rates.

• Employee's income tax band. A higher-rate taxpayer will pay more BiK tax.

The BiK rate is set by HM Treasury and is typically collected through the employee's PAYE (pay-as-you-earn) system.

How could used EVs benefit your business?

New or used, EVs come with a range of benefits that could give your business an edge. Choosing used gives you access to all these great perks at a fraction of the price. Check out some of the ways your business could benefit by investing in a used EV.

Depreciation.

The biggest benefit of choosing used is the savings your business can make on the purchase price. Electric cars generally lose their value slightly faster than petrol or diesel vehicles, especially in the first 12 months. Volatility in the EV market and concerns about EV’s battery longevity can impact their resale value - with other key factors being the vehicle’s age, mileage, condition, and brand’s desirability.

There’s good news though. While EV depreciation can be more of a concern for buyers of new EVs, their steeper depreciation can often mean more affordable used EV options. On average new EV batteries have a lifespan of 15-20 years, so you can still get plenty of mileage out of a second-hand electric car.

Salary sacrifice schemes.

EV salary sacrifice schemes can offer a simple and affordable option for employees wanting to drive an electric car. Instead of paying for a lease out of their take-home pay, employees can reduce their gross salary and have their employer cover the costs. This arrangement reduces their taxable income, leading to savings on income tax and National Insurance contributions.

As an employer there are also benefits: 

The Electric Car Scheme offers a salary sacrifice program for both new and used electric vehicles. The result can be huge savings. Employees could get anywhere between 30-60% off the cost of their electric car, with their employer facilitating payroll adjustments to recoup the vehicle's cost.

Green number plates and HOV lanes.

The UK Government has proposed a plan to introduce special green number plates for zero-emission vehicles (ZEVs), as part of its efforts to reduce air pollution and promote electric powered transport. The idea is that local authorities could allow drivers with these plates special benefits, like being able to drive in bus lanes and high occupancy vehicle (HOV) lanes or enjoy cheaper parking. 

Zero congestion charge. 

Does your business operate in London? Transport for London (TfL) is actively promoting an Electric vehicle (EV) infrastructure strategy that aims to promote the adoption of electric vehicles (EVs) as part of London's goal to become a zero-carbon city by 2030. Working with partners they plan to develop a network of slow, fast, rapid, and ultra-rapid EV charging points across the city.

Other benefits for EV drivers include a 100% discount on the Congestion Charge until 24 December 2025 (for zero emission vehicles that meet the eligible criteria) and government grants for some new plug-in vehicles, like taxis, vans, and trucks. Find out about plug-in vehicle grants.

Expanding ULEZ. 

London's Ultra Low Emission Zone (ULEZ), was expanded last year (August 23) to cover all London Boroughs (excluding the M25). The aim of ULEZ is to reduce air pollution by exempting drivers of zero emission vehicles and charging drivers of older, non-compliant vehicles a daily fee of £12.50. Both Low Emission Zones (LEZ) and ULEZ focus on reducing emissions and improving air quality, whilst the Congestion Charge aims to simply reduce traffic. 

Analysis conducted by Transport & Environment UK, suggests that ULEZ is being  successful in affecting vehicle buyer behaviour – showing diesel fuel sales in particular have fallen significantly in London, outpacing all other regions in the UK.

OZEV business grants for EV charge points.

The Office for Zero Emission Vehicles (OZEV) is a UK government body that aims to promote the adoption of zero-emission vehicles. It offers several grant schemes for EV charging, to support UK businesses in transitioning to electric vehicles.

The Workplace Charging Scheme (WCS). 

This offers financial help to businesses, charities, and public sector organisations in the UK who want to install electric vehicle charge points. It covers up to 75% of the costs (capped at £350 per charging socket) and businesses can apply for up to 40 sockets across all their sites. To be eligible, businesses need to have dedicated off-street parking for staff or fleet use. Find out more about WCS or make an application.

The EV infrastructure grant for staff and fleets.

This is a UK government grant to help businesses install electric vehicle charging points at their workplaces. It’s designed specifically to help small to medium-sized businesses (SMEs) with fewer than 250 employees.

• Funding: The grant covers 75% of the cost of installing chargepoint sockets and the necessary electrical infrastructure.

• Maximum grant: Offers up to £15,000 per site for up to 5 different sites.

• Per socket: Offers up to £350 per chargepoint socket installed.

• Per parking space: Offers up to £500 per parking space with supporting infrastructure.

This grant allows SMEs to install charging points now and in the future as their electric fleet grows. Learn more the EV infrastructure grant for staff and fleets.

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