Leasing Electric Vehicles (EVs) for your business. Is it worth it?

LHP Accountants
Jun 18
3 min read

In this industry insight, we are highlighting the financial advantages for UK businesses considering leasing electric vehicles (EVs), emphasising potential tax savings and operational efficiencies.

Lisa Davies, Associate Director of LHP Accountants - based in Haverfordwest.

Buying – HP or outright purchase

Purchasing an electric vehicle either through HP or outright will allow you to claim 100% of the vehicle in the first year which is called first year allowance (FYA). This is whether you are a partnership, sole trade or limited company. With regards to partnerships and sole trades, if the vehicle is used for both business and personal purposes, the amount you can claim will be proportionally reduced based on the business usage percentage .Where with a limited company you can claim 100%, but there will be a benefit in kind if the vehicle is used for private by an employee or director.

Generally, you cannot reclaim VAT on the purchase of a car, whether new or used, even if your business is VAT-registered.

Tax-Deductible Lease Payments

Leasing an electric vehicle can offer significant financial advantages, as lease payments are generally regarded as deductible business expenses. This allows businesses to offset the entire cost of lease payments against their taxable profits, which may lead to a reduction in their taxable profit.

When leasing a car 50% of the VAT can be reclaimed on the monthly lease rental payments, the remaining 50% is blocked due to deemed personal use, whether there is actually personal use or not.

Insurance and Charging Costs

Insurance premiums for leased electric vehicles (EVs) can be deducted as business expenses, which helps reduce taxable profit. Furthermore, expenses related to charging the vehicle, whether at public charging stations or via home-installed charging points, are also deductible. This encompasses both installation and electricity costs.

However, it is crucial to remember if you are trading as a partnership or a sole trade, all of the above costs will need to include a private use adjustment percentage, therefore we will not be able to claim 100% of the costs unless wholly and exclusively used for the business. If you’re trading as a limited company, you will be able to claim 100% of the above costs.

But you will need to bear in mind if the vehicle is used for private use by an employee or director, that a benefit in kind will need to be reported. The current benefit in kind rate for a zero-emission company car in the 2025/26 tax year is 3%.

Mileage Claims: Actual Costs vs. Flat Rates

Businesses can choose to either claim actual vehicle expenses or utilise HMRC's Approved Mileage Allowance Payments (AMAPs). For personal electric vehicles used for business, the AMAP rate is 45 pence per mile for the initial 10,000 miles, followed by 25 pence per mile thereafter.

Please note that this change can only be made when you switch vehicles; it is not possible to alter your method of claiming on the same vehicle once it is in use.

Please see a list below of the costs you will not be able to claim if you are claiming mileage:

Lease payments
Fuel / charging costs
Electricity
Vehicle tax
MOTs
Repairs
Insurance

Expert Guidance Available

We suggest that businesses assess both claiming methods to identify which one provides more financial advantages. Our team is here to help you calculate and compare potential savings. For tailored advice, please reach out to us.

For more information, please contact:

Lisa Davies

Email: lisa@lhp.co.uk

Phone: 01437 766749

Carmarthen Branch - Llys Deri, Parc Pensarn, Carmarthen, SA31 2NF

01267 237534 | carmarthen@lhp.co.uk

Haverfordwest Branch - 1st Floor Agriculture House, Winch Lane, Haverfordwest, SA61 1R 01437 766749 | haverfordwest@lhp.co.uk

Lampeter Branch - Tŷ Harford, Sgwâr Harford, Llambed. SA48 7HD

01570 422204 | lampeter@lhp.co.uk

Tenby Branch -Barclays Bank Chambers, 18 High Street, Tenby, SA70 7HD

01834 844743 | tenby@lhp.co.uk

Aberaeron Branch - 1 North Road, Aberaeron, Ceredigion SA46 OJD