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How do zero emission vehicles work

3 min. read

Fossil fuels powered vehicles not only make up the overwhelming majority of vehicles on UK roadsLink opens in a new window, but they represent a significant contributor to the emission of greenhouse gases (GHG), with transport responsible for over a quarter of the UK's GHG emissions in 2019Link opens in a new window.

However, research by the British Business BankLink opens in a new window found that while many smaller businesses are thinking about taking action on business vehicles, travel and commuting, action has not yet been carried out.

A key driver for switching to electric vehicles is the government's planLink opens in a new window to stop the sale of new petrol and diesel cars and vans by 2030 with the aim of all new cars and vans being entirely zero-emission at the tailpipe by 2035.

Second-hand petrol and diesel vehicles will still be available, but many smaller business fleets will likely start to migrate to zero-emission vehicles over the coming decade.

With the Office for National Statistics dataLink opens in a new window showing that just 3% of all cars registered in 2020 were powered by alternative fuels such as battery-electric, fuel cell and gas, there is undoubtedly a way to go.

However, electric vehicle (EV) adoption is accelerating and according to The Society of Motor Manufacturers and Traders, electric vehicles enjoyed record sales in 2021 accounting for 18.5% of all new cars registered in 2021Link opens in a new window.

Electric vehicles can benefit both the environment and smaller businesses.

Swapping to a fleet of all-electric vehicles could bring several commercial benefits to your business, from demonstrating your commitment to the environment to saving money on fuel.

Sustainability is a key concern for consumers.

According to research by Deloitte, ethical and sustainability issues are important for almost a third of consumersLink opens in a new window, with one in five opting for low carbon transport or switching to renewable energy.

Switching your fleet to electric could prove popular with eco-conscious customers who prefer to buy from brands looking to lower their carbon footprint.

Financial incentives are attached to electric vehicles as part of the Government's Zero Emissions Cars SchemeLink opens in a new window.

Operating a fleet of electric vehicles can result in favourable tax incentives and remove the need to pay to access roads, such through the London congestion charge.

Financial incentives include:

• vehicle purchasing grants worth £582 million for electric vehicles in place until 2022/23

• tax incentives such as Company Car Tax rates that are lower for zero and ultra-low emission cars until at least March 2025.

The cost of running an electric vehicle may be lower too with Government dataLink opens in a new window showing some zero emission vehicles costing from 1p per mile compared to 10p per mile for petrol and diesel cars.

If your small business is based or operates in London, you may be eligible for a London congestion chargeLink opens in a new window discount when using electric vehicles.

The cleaner vehicle discount applies only to battery-powered electric or hydrogen fuel cell vehicles and lasts until 25 December 2025.

If you want to switch your small business' car fleet to electric vehicles, there is funding available to reduce the costs of migrating to electric vehicles through:

Switching to electric vehicles is a significant decision for a smaller business.

Aside from costs, implications for company car tax and various grants, you'll also need to factor in providing charging points and choosing the right type of zero or ultra-low emission vehicle that's suitable for your business activities.

Some considerations include:

• all electric or hybrid? – Hybrid cars and vans use a dual-power system of a standard combustion engine alongside electric batteries. All-electric vehicles are powered by electric batteries alone
• buy or lease? – There should be a choice with the electric vehicles you identify to either buy them outright or lease them for a set amount of time
• how will you charge your vehicles? – Does your business have the facilities in place to be able to charge electric vehicles?

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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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