First year allowances currently provide an incentive for businesses to replace existing cars with electric versions.
For around 20 years, first year allowances (FYAs) have been available for low emission cars purchased for business use. The current rules enable tax relief to be claimed for 100% of the vehicle’s cost in the year of purchase. However, only qualifying low emission or electrically propelled car purchases made on or before 31 March 2025 will qualify for FYAs.
Expenditure incurred on the provision of electric vehicle charging points also qualify for FYAs, but only before 5 April 2023 for income tax purposes (or 31 March 2023 for corporation tax purposes).
Businesses of all sizes can claim FYAs on a car provided that:
• the car is ‘unused and not second-hand’;
• it is registered on or after 17 April 2002;
• it is an electric car, or a car with a car producing zero CO2 emissions; and
• the expenditure is incurred on or before 31 March 2025.