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What are the Tax Implications of Buying an Electric Van?

25 March 2020
Mark Friend
Reducing Tax, Payroll, Building a Business

The Government has introduced a number of tax incentives and measures to encourage more people to use zero emission vehicles, and there are rumours that the planned ban on the sale of new diesel and petrol vehicles, as well as hybrids, could start as early as 2032.

Much has been written about the tax benefits of driving an electric car, but not so much is known about the tax implications of using a company electric van. To help we have listed below the tax implications of purchasing an electric van via your company.

Capital Allowances

Businesses can deduct the full value of an electric van against profits in the year of purchase by way of a First Year Allowance which is available for expenditure on new and unused electric vans. If however you are looking to buy a used electric van, then it should be eligible for the Annual Investment Allowance, also allowing you to write off the whole cost of the van against profits in the year of purchase. The current AIA stands at £1 million of qualifying expenditure per year.

Benefits in kind – van benefit

From 6 April 2021 the benefit in kind for a company van has been reduced to 0%. This makes it a more tax efficient benefit than an electric car for which the benefit in kind is 1% of the list price for the tax year 2021-22.

Non electric vans will result in a benefit in kind if there is any private use (although unlike for company cars commuting to and from your permanent workplace does not count as private mileage). The benefit in kind is a fixed amount of £3,500  for the 2021-22 tax year.

So for a basic rate taxpayer who is provided with a van (this could include a double cab pick up) which is the only family vehicle used for shopping, weekend trips and holidays, there would be an additional tax bill of £700 in 2021-22 . This tax bill is doubled if the van driver is a higher rate taxpayer.

Benefits in kind – fuel

There is more good news for electric vans. The annual road tax and Van Fuel Benefit Charge for electric vans should stay at £0, as electricity is not considered a fuel.

For non electric vans where fuel is provided for personal use there is a flat-rate van fuel benefit of £669 for the 2021-22 tax year which leads to a further tax bill of £133.80 for basic rate taxpayers and £267.60 for higher rate taxpayers.

The content in this blog is correct as at 14 October 2021 See terms and conditions.

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