As expected, the UK government has today announced significant tax breaks for electric cars as part of the Chancellor’s annual ‘pre-Budget report’. The measures are designed to encourage company fleets to opt for more EVs.
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From the start of the next fiscal year, in April 2010, electric cars and vans are to receive a five year holiday from benefit-in-kind personal taxation – which is currently levied at 9% of the value of the vehicle in the case of electric cars.
In the UK, employees pay income tax on cars, based on the cost of company cars and their CO2 emissions. The range varies from 9% for electric cars to between 10% and 35% for fossil fuel consuming cars.
“To help boost the number of electric cars on our streets, I have decided to exempt them from company car tax for five years,” he said.
“And I can also announce a 100% first year capital allowance for electric vans.”
The measures have been generally welcomed by the auto industry.
The SMMT said that it is ‘pleased that chancellor Alistair Darling has announced investment and support for low carbon technologies, with particular assistance to boost demand for electric vehicles’.
SMMT chief executive, Paul Everitt said, “2010 is set to be another extremely difficult year for the UK motor industry as increased VAT and first year VED rates directly impact on consumer demand. The opportunity is to take advantage of the transition to low carbon vehicles, with new incentives for company car drivers and van buyers, as well as extra resources for collaborative research and development.”
John Lewis, chief executive of the British Vehicle Rental and Leasing Association, said: “These new measures will help speed up the mass market adoption of sustainable road transport in Britain.”
The Retail Motor Industry Federation (RMI) welcomed the move but noted that that ‘demand needs to be stimulated as this is a very small sector of the new car market’.
The incentive is designed to get more companies to put electric vehicles on to their fleets.
Earlier this year the UK government also announced a financial incentive of up to GBP5,000 off the list price of a new electric car from 2011/12.
“These kinds of tax incentives are very important to nurture green innovation within the industry and develop a market for the cleanest forms of transport,” said Faye Sunderland of online green car guide, TheGreenCarWebsite.co.uk.
“Electric cars are not perfect, they have source CO2 emissions. But with the support provided for renewable fuels and small-scale electricity production, electric cars will become cleaner over time,”she said.
