In the Budget 2020, the government confirmed its commitment to having a net zero emissions economy by 2050. As part of this, the Budget introduced measures to encourage the take up of electric vehicles. In this article, we examine these measures and consider recent reports that the government is considering bringing in a new scrappage scheme for petrol and diesel cars.

Road transport is responsible for 91% of domestic greenhouse gas emissions and is a major contributor to poor air quality in UK towns and cities. As a result, the government is keen to increase the number of zero emission vehicles on the road.

In the Budget earlier this year, Chancellor Rishi Sunak set out the following initiatives being brought in to achieve this.

Plug-in Car Grant

The government believes consumer incentives “support the development of markets for new transport technology”. With this in mind, it is providing £403m for the Plug-in Car Grant and continuing the grant until 2022-23. Under this grant, buyers of new low-emission vehicles can get up to £3,000 off the price of a vehicle (it was previously £3,500). A further £129.5m is being provided to extend the grant to vans, taxis and motorcycles.

Vehicle Excise Duty

As further incentive to buy zero emission cars, they will be exempt from the Vehicle Excise Duty (VED) “expensive car supplement”. This means that electric vehicles costing more than £40,000 will not have to pay the supplement of £320 that applies to other cars costing more than this amount.

The government has also announced the publication of a call for evidence on Vehicle Excise Duty, which will consider how it can be used further to reduce vehicle emissions.

Rapid Charging Fund

The government believes that “access to high quality, convenient charging infrastructure is critical for drivers to make the switch to electric vehicles confidently”. It is, therefore, providing £500m over the next five years to support the rollout of a fast-charging network for electric vehicles.

The aim is to ensure that drivers are never far from a rapid charging station. The measures will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid.

To ensure spending from this fund is used effectively, the Office for Low Emission Vehicles has been tasked with completing an electric vehicle charging infrastructure review.

Phase out of petrol and diesel vehicles

The government is consulting on bringing forward the phase-out date for the sale of new petrol and diesel cars and vans from 2040.

First year allowances for business cars

From April 2021, the government will extend the 100% first year allowances to zero emission vehicles (ZEVs) only and apply the main writing down allowance (WDA) of 18% to cars with emissions up to 50g/km. Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

The new 50g/km threshold will also apply for determining the 15% lease rental

restriction for costs of hiring business cars for more than 45 consecutive days. This is

likely to be for lease arrangements commencing on or after 1 April 2021.

Car scrappage scheme

At the beginning of June, it was reported that the government is thinking about launching a new car scrappage scheme. Under the scheme, car owners could receive up to £6,000 to scrap their petrol or diesel vehicle and replace it with an electric vehicle.

News of the plan follows reports that the demand for new cars fell by 90% in May due to the Covid-19 crisis compared to the same month last year.

If you would like to discuss changing vehicles or have any questions regarding the topics discussed in the above blog, please call us on 020 7625 4545.

Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.   

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