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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    EV First-Year Allowance

    EV First-Year Allowance (CAA 2001 s.45D) gives **100% first-year allowance on qualifying NEW + UNUSED ZERO-EMISSION CARS** + EV charging point installation. Originally due to expire Spring 2026; **EXTENDED to 31 March 2027 (Corporation Tax) / 5 April 2027 (Income Tax)**. Zero-emission = ZERO CO₂ emissions at the exhaust, fully electric vehicles. Hydrogen fuel cell vehicles may also qualify. Car must be NEW + UNUSED at time of purchase. **Used EVs do NOT qualify**: second-hand zero-emission cars go to MAIN POOL at 18% WDA (reducing to 14% from April 2026). EV CHARGING POINTS qualify under separate provisions, also extended to April 2027. Cars are EXPLICITLY EXCLUDED from both AIA + Full Expensing, s.45D is the ONLY route to 100% first-year relief on any car. The 2027 expiry is a hard cutoff unless extended again by future Budget, plan EV purchases ahead of the deadline.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    What this relief is, in plain English

    EV FYA is the UK's flagship tax incentive for electric vehicle adoption, 100% first-year allowance on new + unused zero-emission cars + EV charging points. Combined with the 3% BIK rate for pure-electric company cars in 2025/26 (rising to 7% by 2028/29, still extremely low vs 37% for petrol/diesel), the package makes Ltd Co director EV adoption one of the most tax-efficient personal-asset extraction routes available. For higher-rate-taxpayer directors, leasing or buying a £50,000 EV through the company can save thousands per year vs personal-name purchase from post-dividend income. The relief expires 31 March 2027 (CT) / 5 April 2027 (IT) unless extended again. Multiple extensions over the past decade suggest further extension is possible but not certain, particularly given political pressure on EV incentives + competing fiscal priorities. Businesses planning fleet electrification or director company-car EV adoption should aim to complete purchases before the deadline to lock in the 100% first-year relief. Used EVs are explicitly excluded, main pool 18% WDA (now 14% from April 2026) is the slower fallback. For businesses with mixed-use existing EVs that they'd want to claim allowances on, the timing of acquisition (new vs second-hand) is decisive for relief rate. EV charging point installation is a related but separately-provisioned relief on the same April 2027 cutoff, affects businesses planning workplace charging infrastructure investment.

    How it works

    100% FYA on new + unused zero-emission cars

    Qualifying cars: fully electric (zero CO₂ at exhaust) + new + unused at time of purchase. Hydrogen fuel cell vehicles may also qualify. 100% of cost deductible in year 1. Sole-trader private-use apportionment applies (restrict deduction by business-use %); Ltd Co has no apportionment at company level (BIK handled separately at director level).

    Used EVs excluded → main pool 18%/14%

    Second-hand zero-emission cars do NOT qualify for s.45D FYA. They go to MAIN POOL at 18% WDA in 2025/26 (reducing to 14% from April 2026). Slow recovery vs 100% immediate relief. The new-vs-used decision is decisive for the relief rate available.

    EV charging points, separate but parallel provision

    Equipment for electric vehicle charging point installation qualifies for 100% FYA under separate CAA 2001 provisions. Same April 2027 cutoff applies. Useful for businesses planning workplace charging infrastructure, covers the charging equipment cost. Civil works (groundworks, electrical supply upgrades) may be partially capital-allowance-qualifying under SBA or main pool depending on classification.

    April 2027 cutoff

    EV FYA + EV charging point provisions expire 31 March 2027 (CT) / 5 April 2027 (IT) unless extended. Multiple prior extensions exist but further extension is uncertain. Post-expiry: new zero-emission cars default to main pool 14% WDA (already reduced from 18% in April 2026). Plan EV purchases ahead of the deadline if relying on 100% relief.

    Who qualifies

    Interactions with other reliefs

    AIA + Full Expensing

    Cars EXCLUDED from both AIA + Full Expensing entirely. EV FYA is the ONLY 100% relief route for cars. Non-car commercial vehicles (vans, lorries, motorcycles) qualify for AIA / Full Expensing on standard rules, different mechanics.

    Writing Down Allowances

    Used EVs + petrol/diesel cars default to main pool 18% WDA (14% from April 2026), vs 100% EV FYA on new zero-emission cars. WDA gives slow reducing-balance recovery.

    Company Car BIK

    Ltd Co EV given to director: company claims EV FYA at 100% first year + EV BIK 3% (2025/26 → 7% by 2028/29) hits director's personal tax. Combined effect: extremely tax-efficient for higher-rate directors. Petrol/diesel comparable: company gets main pool WDA + director pays up to 37% BIK, much less efficient.

    Common mistakes + audit triggers

    Worked example

    Chen, Bristol - Ltd Co director acquiring new EV via company in 2025/26 (2025/26)

    Chen's Bristol Ltd Co consultancy buys a new £55,000 Tesla Model Y in October 2025 (zero CO₂, new + unused). Provided to Chen as company car (sole director-employee). Company pays 25% main rate CT on £180,000 profits (above £250k upper limit). Chen is higher-rate taxpayer.

    Calculation: **EV FYA claim:** 100% × £55,000 = £55,000 first-year allowance. Company taxable profit reduces from £180,000 to £125,000. CT saving: 25% × £55,000 = **£13,750**. (Note: £125,000 profit puts company in marginal band; marginal relief mechanics apply, but the £55,000 deduction itself is the EV FYA value.) **Chen's BIK position:** BIK rate 2025/26 for zero-emission cars: 3%. Taxable benefit: 3% × £55,000 = £1,650/year. Chen's personal tax at higher rate 40%: £660/year. Class 1A NIC at 15% (employer): 15% × £1,650 = £247.50/year (paid by company). **First-year combined impact:** Company CT saving: £13,750 Less company Class 1A NIC: -£247.50 Net company saving year 1: £13,502.50 Chen's personal tax cost on BIK: -£660 **Net combined benefit year 1: £13,502.50 - £660 = £12,842.50** on £55,000 of vehicle provision. **Ongoing years (assume vehicle held 4 years):** BIK trajectory: 3% (2025/26) → 4% (2026/27) → 5% (2027/28) → 7% (2028/29). Annual BIK tax for Chen (assume continuing higher-rate position): ~£660 → £880 → £1,100 → £1,540. Annual Class 1A NIC for company: ~£247 → £330 → £412 → £577. **4-year total cost of company car provision:** ~£3,180 personal tax + ~£1,566 company NIC = ~£4,746 across 4 years. **vs first-year CT saving of £13,750** + use of asset across 4 years. **Disposal at end of year 4 (assume £25,000 trade-in value):** Balancing charge: £25,000 (taxable income year 4 for company). CT on balancing charge: 25% × £25,000 = £6,250. **Lifetime net benefit:** £13,750 (EV FYA) - £4,746 (ongoing costs) - £6,250 (balancing charge) = **£2,754 net tax benefit** on £55,000 vehicle provided + 4 years of director use + £25,000 residual recovery. **Comparison to personal-purchase route:** If Chen had bought the EV personally from post-dividend income: - £55,000 gross dividend needed: ~£82,000 (after 33.75% higher-rate dividend tax). - Plus company would have first taxed the £82,000 corporate income at 25% CT: ~£109,000 gross profit needed. - Personal EV ownership: no BIK, no company-car-related CT savings, no balancing charge on personal sale. **Company route saves Chen approximately £40,000+ on a £55,000 EV acquisition over 4 years.** The EV FYA + 3%-rising-to-7% BIK combination is one of the most extraction-efficient mechanisms in UK Ltd Co tax planning. **Eligibility qualifier**: this worked example combines multiple reliefs and specific income assumptions. Whether all of them apply to you, and the saving available in your case, depends on your individual income position, residency, and employer arrangements. See /why/editorial-scope.

    Statute reference: Capital Allowances Act 2001 s.45D (zero-emission cars) + related provisions for EV charging points. HMRC manual: CA23156.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Can I claim EV FYA on a Tesla I bought second-hand?+
    No, only NEW + UNUSED zero-emission cars qualify for the 100% FYA under s.45D. A second-hand Tesla (even if zero CO₂ + unmodified) goes into the MAIN POOL at 18% WDA (reducing to 14% from April 2026). The mechanic gives slow recovery vs the 100% immediate relief of EV FYA. Strategy: for businesses planning EV adoption + wanting 100% relief, BUY NEW. The price premium of new vs used EV is typically £8,000-£15,000, but with 25% Corporation Tax saved on the full new price at 100% relief, vs only 14%/year reducing balance on used, the net cost comparison often favours new EV for Ltd Co buyers.
    What happens to EV FYA if I don't buy before April 2027?+
    EV FYA expires 31 March 2027 (CT) / 5 April 2027 (IT) unless extended again. Post-expiry, new zero-emission cars would default to main pool 18% WDA (or 14% from April 2026 onwards), losing the 100% first-year relief. The relief has been extended multiple times, originally a 5-year measure introduced 2009, repeatedly extended at successive Budgets. Plan EV purchases ahead of the April 2027 cutoff if relying on the 100% relief. Note: the EV CHARGING POINT provision (separate but on same deadline) also expires April 2027, affects businesses planning workplace charging infrastructure investment.
    Can my Ltd Co claim EV FYA on a director's company car?+
    Yes, the company can claim EV FYA on a new + unused zero-emission car provided to a director as a company car. The car is the company's asset; capital allowances apply at the company level (no apportionment for private use at the company level, that's instead handled via the director's BIK position). Combined extraction: EV FYA at 100% gives company CT relief; director pays BIK on the car (3% in 2025/26, rising to 7% by 2028/29, extremely low rates vs 37% for petrol/diesel). For a £50,000 new EV provided to a higher-rate-taxpayer director: 25% × £50,000 = £12,500 CT saved in year 1; BIK 3% × £50,000 = £1,500 taxable benefit × 40% = £600/year personal tax. **Combined first-year benefit: £12,500 - £600 = £11,900 net** on company vehicle provision via EV FYA + BIK at 3%.
    What's the disposal mechanic on an EV FYA-relieved car?+
    Cars are in single-asset pools (separate from main + special rate pools), disposal proceeds generate a BALANCING CHARGE if exceeding the asset's tax written-down value (initially zero after 100% FYA). Example: £50,000 new EV, 100% FYA claimed → asset's tax written-down value drops to zero. Sold 3 years later for £25,000 → balancing charge of £25,000 (taxable). For sole traders with private use apportionment: balancing charge restricted by the business-use proportion. The balancing charge is the cost of the 100% relief: deferred CT on the original full deduction, recovered when the asset is sold. Plan disposal timing to coincide with low-profit years or absorb against other losses where possible.

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