The 100% write-off for new electric company cars ends on 31 March

The 100% first-year allowance for new zero-emission cars ends on 31 March 2027 for companies and 5 April 2027 for unincorporated businesses. Claritax Books, which publishes tax guidance for accountants, puts the first-year corporation tax saving on a £60,000 electric car at £15,000 before the deadline and £1,800 after it.

The allowance has been part of the electric car case since 2002. Losing it changes when a business gets tax relief rather than how much it gets in total, and that distinction decides whether the deadline matters to you.

What the allowance does

Capital allowances let a business deduct the cost of an asset from its profits before tax. A first-year allowance does it in one go. For a new and unused car with zero tailpipe emissions, GOV.UK's guidance on business cars says the business can claim the full value in the year of purchase.

The rate matters because corporation tax is charged on profit. A company paying the main 25% rate saves £25,000 for every £100,000 of qualifying expenditure, provided it has the profit to offset.

The allowance has a limit that the trade coverage tends to skip. Cars bought to lease out do not qualify. HMRC's capital allowances manual sets out the general exclusion for plant and machinery provided for leasing, and the car allowance has sat inside it since 2013. A business buying a car for its own use can claim. A leasing company buying the same car for a customer cannot.

GOV.UK's tax information and impact note confirms the end date: 31 March 2027 for corporation tax and 5 April 2027 for income tax.

The £60,000 arithmetic

Claritax's example is a £60,000 electric car bought by a company paying the main rate. Before April, the full £60,000 comes off profits in year one, which is £15,000 of corporation tax at 25%.

In April the first-year allowance has gone. The car falls into the main rate pool, where the writing-down allowance is 12% from 1 April 2027, down from 14%, according to ICAEW's summary of the Budget measure. Twelve per cent of £60,000 is £7,200, and 25% of that is £1,800.

The rest is not lost. The unrelieved £52,800 stays in the pool and attracts 12% a year on a reducing balance, so the cost is deducted over time rather than in one year. ICAEW makes the point plainly: the change affects when relief arrives, not the total.

The timing still costs money. £13,200 more tax falls due in the first year and comes back over the following years as the pool is written down. A pound of tax deferred is worth more than a pound paid now, which is why capital allowances are used to pull investment forward. The cut from 14% to 12% compounds the effect for any balance already in the pool.

Ray Chidell, director at Claritax Books, said the combined effect of the changes was "substantial for employers providing electric cars to their employees".

Why company cars went electric

The company car market is where electric cars have made the deepest inroads. HMRC's benefit in kind statistics put the number of company car benefit recipients at 920,000 in 2024/25, of whom 467,000, or 51%, were fully electric. That is up from 342,000 a year earlier.

Benefit in kind did the work, not capital allowances. Electric company cars sit at a 4% taxable percentage this year, against at least 25% for the cleanest petrol and diesel models, and the rates are now set through 2030/31. The arithmetic of that gap moved drivers into electric cars, and the Budget's rate schedule lets fleets plan a four-year lease.

Most of those cars are leased. The 100% allowance has therefore been doing less work in the company car market than its reputation suggests. It matters most to businesses that own their cars: owner-managed companies, partnerships, sole traders who use a car in the business, and firms running pool cars.

What it means if you are buying

If your business buys cars outright, work to 31 March 2027 as a company, or 5 April 2027 as a sole trader or partnership. The test is when the expenditure is incurred, not when the car arrives. HMRC's guidance says expenditure is incurred when the obligation to pay becomes unconditional, which usually means delivery, unless payment is due more than four months later.

Ordering in March with delivery in April may not qualify. A contract that fixes the obligation in March might. The difference on a £60,000 car is £13,200 in the first year, so the order form matters as much as the delivery estimate.

If you lease, this change does not touch your rental. The lessor cannot claim the allowance, and removing something it never had cannot push the monthly price up. A driver's benefit in kind is unaffected by this measure, and those rates are already published through 2030/31.

Electric cars keep an advantage after April. A zero-emission car goes into the main pool at 12%, while a car emitting more than 50g/km goes into the special rate pool at 6%. A full write-off becomes a two-to-one difference in the first year.

The charger allowance goes too

The same deadline applies to the 100% first-year allowance for electric vehicle chargepoints, under section 45EA of the Capital Allowances Act. A business installing chargers at a depot or workplace can claim the full cost against profits until 31 March 2027, and cannot from April.

That is a smaller number per site than a car, and a larger one for a business fitting out a yard. The £38m depot charging scheme shows how long these projects take to get from funding to installation, which is the practical argument for starting one this winter rather than next spring.

Sources

Fleet News: "Businesses warned of pending steep reduction in EV tax savings", 9 November 2026. https://www.fleetnews.co.uk/news/businesses-warned-of-pending-steep-reduction-in-ev-tax-savings
ICAEW: "100% first year allowance for electric cars to end in April 2027", 6 November 2026. https://www.icaew.com/insights/tax-news/2026/nov-2026/100-per-cent-first-year-allowance-for-electric-cars-to-end-in-april-2027
GOV.UK: "Capital allowances: extension of first-year allowances for zero-emission cars and chargepoints", 26 November 2025. https://www.gov.uk/government/publications/first-year-allowances-for-zero-emission-cars-and-electric-vehicle-chargepoints/capital-allowances-extension-of-first-year-allowances-for-zero-emission-cars-and-chargepoints
GOV.UK: "Claim capital allowances: business cars", updated 22 October 2024. https://www.gov.uk/capital-allowances/business-cars
HMRC: "CA11800: when capital expenditure is incurred". https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca11800
HMRC: "CA23113: general exclusions". https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23113
HMRC: "Benefit in kind statistics commentary, July 2026", 15 July 2026. https://www.gov.uk/government/statistics/benefits-in-kind-statistics-july-2026/benefit-in-kind-statistics-commentary-july-2026
GOV.UK: "Corporation Tax rates". https://www.gov.uk/corporation-tax-rates