First-Year Allowances extension for zero-emission assets
The recent Budget confirmed a First-Year Allowances extension for zero-emission cars and electric vehicle (EV) charge points. This measure continues the government’s commitment to supporting businesses that invest in sustainable transport solutions.
What the extension means for businesses
The 100% FYA for qualifying expenditure on zero-emission cars and EV charge points will now remain available until 31 March 2027 for Corporation Tax purposes and until 5 April 2027 for Income Tax purposes. This one-year extension allows eligible businesses to deduct the full cost of these assets from taxable profits in the year of purchase.
Background to First-Year Allowances
First-Year Allowances for cars were introduced in April 2002 for low CO₂-emission vehicles. From April 2021, the relief was restricted to zero-emission cars only. Similarly, the allowance for EV charge points was introduced in November 2016. Both measures aim to accelerate the UK’s transition to cleaner vehicles and infrastructure.
Why the First-Year Allowances extension matters
This extension ensures businesses can continue to benefit from immediate tax relief on qualifying expenditure. By claiming 100% in the first year, companies improve cash flow and reduce upfront costs. This incentive is particularly valuable for firms investing in electric fleets or installing charging facilities.
Expected impact on UK businesses
According to HMRC, around 13,000 incorporated businesses and 6,000 unincorporated businesses will benefit from this measure. These organisations can claim full tax relief on zero-emission cars and EV charge points, making sustainability more financially attractive.
Planning ahead for maximum benefit
Businesses should review their investment plans promptly. Acting before the allowance expires ensures they capture the full benefit. Combining this relief with other incentives, such as the Annual Investment Allowance, can further enhance tax efficiency.
