Article
Five tax benefits available to your business for going green
Going green isn't just good for the planet - it's good for your bottom line too. As the UK government continues to support sustainable business practices, here are several tax reliefs and incentives available to help you reduce costs while contributing to a cleaner future.
Last updated 17 Oct 2025 | First published 15 Nov 2019
By Helen Wood, CA 3 min read
Directors' Series
Being a green, sustainable business can offer improved reputation and make your business more attractive to both customers and employees. Here are five key tax benefits your business can access by going green.
1. Electric vehicles beat the rest in the company car stakes
Benefit-in-kind tax
Businesses that opt for fully electric vehicles (EVs) pay lower rates of company car tax than hybrid cars and much lower than standard petrol or diesel cars. From 6th April 2025, the benefit-in-kind (BIK) rates began to rise for all company cars but the rate for EVs is rising at a slower rate than hybrids and standard petrol or diesel cars.
EVs (zero emissions cars) have a BIK rate of 3% for 2025/26, compared to 3-20% for ultra-low emission cars (up to 74g/km of CO²) and up to 37% for other petrol and diesel cars.
The BIK rate for EVs is due to rise by 1% per year until 2028 and then 2% per year until it reaches 9% in 2029/30. By contrast, rates for all non-EVs will rise sharply until cars with 1-50g/km of CO² attract a flat rate of 18% in 2028/29 and 19% in 2029/30. Other petrol and diesel cars will have rates of up to 39% by 2029/30.
Vehicle Excise Duty
From April 2025, Vehicle Excise Duty (VED) applied to EVs for the first time. From the second year in which a car is registered, the standard rate will apply (£195 for 2025/26) but EVs still benefit from a lower first year tax of £10.
Together these tax incentives make fleet upgrades not only environmentally friendly but financially savvy.
For more information on the tax benefits of electric vehicles look here.
EV chargers
In addition to lower BIK rates and VED rates for EV’s, the UK Government’s Office for Zero Emission Vehicles (OZEV) offers tax incentives for businesses installing their own EV charging points via the Workplace Charging Scheme until 31st March 2026
This voucher-based scheme offers financial support towards the initial purchase and installation costs for electric vehicle charging points for staff.
2. Take part in the Cycle to Work scheme
If you aren’t doing so already, consider offering the Cycle To Work scheme to your employees to encourage active travel as well as reducing your carbon footprint. This scheme is a popular salary sacrifice scheme, allowing employees to use bikes and safety gear such as helmets tax-free.
Not only can your employees benefit from having tax-free access to a new bike, but employers obtain tax relief too, as the saving of National Insurance Contributions (NICs) on the salary sacrificed benefits both the employee and employer.
Aside from the tax benefits for you and your staff, engaging your employees in cycling to work can also help create a happier, healthier workforce and reduce the number of commuting cars on your local roads.
3. Enhanced capital allowances for energy efficient technologies and equipment
For limited companies planning on investing in energy-saving technologies, it’s possible to secure tax breaks for these investments. 100% first year allowances offer full relief for new and unused equipment including:
- electric cars and zero emission cars
- biogas and hydrogen equipment and storage tanks
- zero-emission goods vehicles
- equipment for electric vehicle charging points
Freeports and investment zones
Businesses located in special tax sites known as Freeports or Investment Zones may also be able to claim enhanced capital allowances for eligible plant and machinery, which also provide100% first-year allowances..
Sole traders and partnerships who use cash basis accounting cannot claim capital allowances and instead deduct allowable expenses as they occur.
4. Research & Development tax reliefs for greener products or services
If your business is investing in research and development (R&D) to advance in science or technology in your particular field, you might be eligible for R&D tax credits.
The rules determining which projects qualify for relief are complex and open to interpretation. You must ensure the relief is claimed in the correct manner. If you’re unsure whether your business qualifies, contact TaxAssist Accountants today.
5. Heat networks relief
Businesses installing renewable energy systems such as solar panels, wind turbines or other low carbon sources may qualify for relief on business rates via heat networks relief. If you generate renewable energy and supply heating or cooling to other properties, you could be exempt from business rates on those systems.
Other business rates reliefs are also available. Check with your local authority for eligibility and application details.
For other ways on making your business more sustainable take a look at this article.
How we can help
If you would like more information about the tax benefits of reducing your business’ carbon footprint, call us on 01753 971 440 or use our online enquiry form to arrange a free initial meeting to discuss the available options.
Frequently Asked Questions
The most frequently claimed are Enhanced Capital Allowances, providing EVs for employees via salary sacrifice schemes, and the Cycle to Work Scheme, all offering substantial deductions and tax savings.
Potentially yes, through capital allowances or business rates relief, depending on how the energy is used, where you are located and your business structure.
Yes. Electric vans qualify for 100% first-year capital allowances and benefit from lower running costs.
Last updated 17 Oct 2025 | First published 15 Nov 2019
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Helen Wood, CA
Helen is a qualified chartered accountant (CA) and joined TaxAssist in 2025 following three years as a freelance content writer for clients in the tax and accounting publishing sector. Prior to this, She spent 17 years at Big Four and Top 10 accountancy firms. Helen writes clear and helpful articles on tax and accounting for businesses and individuals.
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