Do you know that you can pay less tax by making more environmentally friendly choices? The government has put forward a few tax incentives for taxpayers to choose to go green. These tax incentives include tax breaks for choosing low emission cars, the cycle to work scheme, etc. This article will also cover how the Government has made the tax system more helpful for our environment and human health.

Low Emission Cars for Employees

The lower the CO2 (carbon dioxide) emission level, the lower the tax charge on the company care benefit.

If you hire an employee and provide them a company car, it will be used for both business and personal use. The employee will be due an income tax charge on the personal use of the car.

If you are providing a high-emission car, it is not beneficial for you because the employee gets a higher tax charge. But if you provide a low-emission car or an electric car, where the carbon dioxide emissions are under 75g per kilometre, the employee will get less tax charge. If you are the director of the company, the same rule will apply to you.

Low Emission Car for Business Tax Benefit

When you buy a company asset you can get tax relief by claiming capital allowance. In most cases, you may not receive the full amount of capital allowance if you purchase a business car. For example, purchasing a car for £20,000, during the first year you can only write down 18% of the value of the car as capital allowance. On the other hand, if you do purchase a low-emission car with a higher cost, you will get 100% of the capital allowance (i.e. First Year Allowance) during the year you purchased the car.

Fuel Scale Charge 

This applies to you if you are a VAT registered business. You might be able to reclaim the VAT you paid whenever you have purchased fuel on your business journey. But due to the personal element use of the car, the Government put a ‘reverse VAT charge’ to restrict you from reclaiming the full amount of the VAT on the fuel costs. This is called Fuel Scale Charge and the level of charge depends on the CO2 emission of the car.

For example, if you have spent on fuel this quarter and the total VAT paid is £200, and the CO2 emission of the car is 120g/km, you will only get £140 fuel scale charge. This means you can reclaim the difference which is £60 and that is what you will get back from the government.

If your car has higher emissions, then the charge will be higher. If the fuel scale charge is £393 (CO2 emission is 190g/kg) then you need to pay back an extra £193. The government wants people to use low-emission cars, so it is a tax incentive.

Cycle to Work Scheme

The government has also introduced another tax incentive that is called the Cycle to Work Scheme. This enables you to provide to your employees a certain amount of bicycle vouchers per year, which is tax free, to encourage them to cycle to work instead of driving or using public transport. This means you are encouraging your employees to live a more active lifestyle and effectively when people drive less then there will be less carbon dioxide emissions which is more environmentally friendly.

How the Tax System Can Be More Helpful for Our Environment and Human Health – here are a few thoughts

  1. Levying more tax on animal products

51% or more of the global greenhouse-gas emissions are caused by animal agriculture.

At the moment, there is 0% rate VAT on raw food such as meat, fish, vegetables and fruit which are fit for human consumption. When we consume food that is in its raw form we believe it is good which is true but it is causing more and more pollution. As farmers want to produce a lot of meat, they mass produce the meat by mass feeding the livestock. Effectively, the more animals you produce will produce more carbon dioxide. There are certain animals where once they produce gas, it is 25 times more powerful than carbon dioxide.

When farmers are producing meat, they will require more land, energy and water. As they are taking up a lot of land, when the animals produce a lot of waste it is not good for the land as well. Fish farming is also very commercialised and it creates a lot of pollution in the ocean. The fish are fed different nutrients but it is not as nutritious as before and it is destroying the oceans system.

  1. Making all processed and unhealthy foods all VAT-able

Most people know processed food is not good for our health, but not all processed food is levied on VAT. For example, ready to eat meals are 0% rated. Microwave meals are not good for our health, the plastic packaging is not good for the environment and in order to preserve the food more oil is added to the food.

The government should encourage people to be environmentally friendly and encourage people to consume more raw vegetables rather than meat. Consuming raw vegetables and fruit is better for our health as we need most of the nutrients from them. The government could also think of more tax incentives to encourage people to be healthier.

If you find this content useful, we do provide tailored professional advice on your personal or business tax matters. If you are interested, please direct message the author of this article so we can arrange a chat.

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