The government has ended the grant scheme for new orders of plug-in cars, as it looks to focus on the electric vehicle charging infrastructure. This is happening with immediate effect from 14 June 2022.
Drivers could previously claim up to £1,500 towards the cost of a plug-in car costing less than £32,000. The grant was introduced as a temporary measure and successive reductions in the size of the grant, and the number of models it covers, helped an increasing number of buyers into electric cars. The government is now refocusing its funding into other areas. £300 million in grant funding will now be offered to boost sales of plug-in taxis, motorcycles, vans and trucks and wheelchair accessible vehicles.
The government stated that reductions in the plug-in grant in recent years and the car models that it covers, have not hampered EV sales – with hope that now the market has been kickstarted it will continue to grow, especially with more access to the necessary infrastructure.
‘Range anxiety’ is now considered the largest stumbling block for pushing more drivers to go electric, hence the change in focus from government funding.
Electric drivers will continue to benefit from zero road tax and lower company car tax rates that can save up to £2,000, the government has revealed.
All existing applications for the grant will continue to be honoured and where a car has been sold in the two working days before the announcement, but an application for the grant from dealerships has not yet been made, the sale will also still qualify for the grant.
The government is also planning to adopt a zero emission vehicle (ZEV) mandate, which will require manufacturers to sell a certain percentage of those cars and vans from 2024 with the sale of new petrol and diesel cars and vans in the UK being banned from 2030.
What does this mean?
The company car tax, also known as Benefit-in-Kind (BiK), on electric cars is just 2% in 2022/23, and will remain the same for the next three financial years (up to April 2024) so there are still savings to be made compared to running petrol or diesel-engined cars, which can incur BiK rates up to 37% based on their emissions. With the loss of the incentive, careful consideration and a thorough comparison should be given to the costs of purchasing a vehicle (electric or otherwise) and how much tax the company and the employee each pay depending on the vehicle’s value, its CO2 emissions and the income-tax bracket of the employee.
For further advice regarding the tax implications of switching to an electric/ultra-low emission vehicle, please get in touch with Julie Walsh by clicking the button below.