Business going green
In recent years, there has been a lot of emphasis on companies reviewing and improving their green credentials. Sustainable business practices undoubtedly help the environment, but they can also offer several tax advantages. Here, we explore how becoming more eco-conscious can help you reduce costs.
Lower tax rates for EVs
Using electric vehicles is a simple way to make your operations more sustainable and reduce your rates of company car tax. From 6 April 2025, benefit-in-kind (BIK) rates began to rise for company cars, but the increase is slower for fully electric vehicles, meaning you pay less to run them. Cars producing zero emissions have a BIK rate of 3% for 2025-26, while those with low emissions (up to 74g/km of CO2) have a rate of between 3 and 20%. Choosing petrol or diesel vehicles will bring your BIK rate up to as much as 37%.
Investing in EVs may mean you’ll have to factor in the cost of EV charging points too, but there are tax incentives for businesses installing chargers under the Workplace Charging Scheme. These last until 31 March 2026.
Lower bills with solar panels
Installing solar panels to cover some of your electricity needs is also beneficial for both the planet and your bottom line. While the outlay is significant, businesses can claim tax relief using the Annual Investment Allowance (AIA), which enables them to deduct up to 100% of the cost from profits before tax. Rooftop solar installations are also exempt from increasing your business’ rateable value until 2035.
In addition to these benefits, your business will spend less on utilities, leaving more funding for other things. For example, investment in a 12kW solar array for a small premises could cut electricity bills by around 50% and deliver a payback period of less than ten years.
Research & Development reliefs for eco-conscious products
If your business is investing in research and development (R&D) to create more sustainable products, processes or technologies, you may be eligible for R&D tax credits.
Whether you qualify depends on whether your project seeks an advance in a field of science or technology, and whether successful outcomes would benefit other parts of the industry you’re in. The rules around claiming can be complex, so ensure you work with an accountant when making your claim.
Cycle to Work scheme
Offering the Cycle to Work scheme to your employees encourages active travel and reduces your business’ carbon footprint. As a popular salary sacrifice scheme, it benefits employees by giving them tax-free access to a new bike and related safety gear, and saves employers National Insurance Contributions on the salary sacrifice.
Aside from this, encouraging active travel to work can result in a happier, healthier staff, reducing the number of sick days and improving overall productivity and performance.
Exploring sustainable practices and tax relief
If you’d like to explore options for going greener and discuss the related tax benefits, speak to a reputable accountant for advice. From benefits-in-kind to R&D, they can advise on costs, claiming relief and more.
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