Capital allowances: extension of first-year allowances for zero-emission cars and chargepoints
Published 26 November 2025
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This publication is available at 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
Who is likely to be affected
Businesses acquiring zero-emission cars or installing electric vehicle chargepoints.
General description of the measure
This measure will extend the availability of the 100% first-year allowance for qualifying expenditure on zero-emission cars and the 100% first-year allowance for qualifying expenditure on plant or machinery for electric vehicle chargepoints by one year, to:
-
31 March 2027 for Corporation Tax purposes
-
5 April 2027 for Income Tax purposes
Policy objective
This measure will extend support for the transition to electric vehicles as part of the government’s wider commitment to the UK achieving net zero greenhouse gas emissions by 2050.
Background to the measure
The first-year allowance for cars was originally introduced for expenditure incurred from 17 April 2002 for low CO2-emission cars, including electric cars, and eligibility was later restricted to cars with zero-CO2-emissions from April 2021. The first-year allowance for electric vehicle chargepoints was originally introduced for expenditure incurred from 23 November 2016. These first-year allowances were introduced to support the UK’s transition to cleaner vehicles.
Detailed proposal
Operative date
This measure will have effect for qualifying expenditure incurred on or after 1 April 2026 for Corporation Tax purposes, and on or after 6 April 2026 for Income Tax purposes. Both first-year allowances will now expire on 31 March 2027 for Corporation Tax purposes, and 5 April 2027 for Income Tax purposes.
Current law
The current law for the first-year allowance for zero-emission cars is contained in section 45D of the Capital Allowances Act 2001, and that for electric vehicle chargepoints is at section 45EA.
Proposed revisions
Legislation will be introduced in Finance Bill 2025-26 to extend these two first-year allowances by one year to 31 March 2027 for Corporation Tax purposes and 5 April 2027 for Income Tax purposes.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| -5 | -145 | -100 | +15 | +20 | +25 |
These figures are set out in table 4.1 of Budget 2025 and have been certified by the Office of Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure only affects businesses, therefore it is not anticipated that there will be disproportionate impacts on those in groups sharing protected characteristics.
Administrative impact on business including civil society organisations
This measure is expected to have a positive impact on an estimated 13,000 incorporated businesses and 6,000 unincorporated businesses per year by continuing to provide an increased level of tax relief for expenditure on new zero-emission cars, and plant or machinery for electric vehicle chargepoints, for 100% of the cost for the accounting period in which the expenditure is incurred. It will have a negligible administrative impact on these businesses.
One-off costs will include familiarisation with this change and could include updating the software as a result of this change. There are not expected to be continuing costs.
Continuing savings could include businesses not having to calculate tax relief through writing down allowances in future accounting periods against the purchase costs of zero-emission cars and equipment for electric vehicle chargepoints.
Small and micro-business assessment — the extension to the first-year allowance for electric vehicle chargepoints is expected to benefit the largest small and micro-businesses whose investments in plant or machinery regularly exceed the £1 million limit of the Annual Investment Allowance.
This measure is expected overall to have no impact on businesses’ experience of dealing with HMRC as the extension of these first-year allowances does not change any processes or tax administration obligations.
It is not expected to impact on civil society organisations.
Operational impact (£ million) (HMRC or other)
There will be minimal HMRC operational costs for making this change.
Other impacts
This measure has a behavioural impact by incentivising businesses to purchase vehicles with zero-CO2 emissions to support the government’s wider objective of reducing greenhouse gas emissions to net zero by 2050.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored and assessed alongside other measures in the government’s package for Corporation Tax.
Further advice
If you have any questions about this change, contact HMRC by email: contact.capitalallowances@hmrc.gov.uk.