The UK is ramping up its efforts to go green and get everyone on board; the government has rolled out some pretty great perks for people and businesses willing to make eco-friendly changes. In addition to saving your money (slashing energy costs), these green tax breaks are a win-win for your pocket and the environment. If you’re wondering how investing in sustainability can save you money, this guide breaks it all down in simple terms.
What Are Green Tax Breaks?
Green tax breaks are basically financial incentives for being green. From installing solar panels on your roof to having more energy-efficient appliances to driving an electric vehicle, the government has now provided methods to save money while saving the planet. The concept is to encourage everyone to adopt green choices without experiencing financial loss.
Green Tax Breaks for Businesses
1. Tax Relief for Energy-Efficient Equipment
If a company buys energy-efficient equipment-such as low-carbon units or water-saving setups-they can write off 100% of the purchase price as a tax expense. This is the component of the Enhanced Capital Allowance (ECA) scheme, whereby tax savings are available immediately rather than having to wait for years to recover expenditure.
2. Lower Energy Taxes (CCL Exemptions)
Businesses are typically liable to pay the Climate Change Levy (CCL) for the cost of their energy bills, but substantial reductions (or even abolition) of the levy may apply if you switch to renewable energy or increase overall energy efficiency. Complying with a Climate Change Agreement ‘CCA’ may reduce electricity taxes by up to 90% and gas bills by 65%.
3. Tax Relief for Green Investments
If you’re investing in green businesses, you can claim Green Investment Tax Relief, which allows:
- A 30% refund on income tax deduction being made for your investment
- To pay no Capital Gains Tax (CGT) if you hold the shares for three years
This makes it more convenient (and easier) to support renewable companies or ecological initiatives.
Go Electric and Save Big
In the UK, electric vehicles will one day be the only type of vehicle we can drive, and the government is doing everything it can to make sure our vehicles become greener.
1. Plug-In Car Grant
Buying an EV offers eligible savings of up to £2,500 thanks to the Plug-In Car Grant. That can create some serious savings when you compare it to a regular petrol or diesel car.
2. Super Low Company Car Tax (BIK Rates)
For business drivers, electric cars are a no-brainer. The Benefit-in-Kind (BIK) tax rate on EVs is still only 3% in 2025/26. Compare that to the higher rates for gas-guzzlers, and you’ll see why more companies are switching their fleets to electric.
3. No Road Tax
Zero-emission cars are currently exempt from road tax.
Green Investment Opportunities
1. Enterprise Investment Scheme (EIS)
Got some spare cash to invest? The EIS pays you for investing in venture capital in high-risk firms, such as green innovative ventures. You can get:
– 30% income tax relief
– No CGT on gains if you have an investment for 3 years
2. Seed Enterprise Investment Scheme (SEIS)
For smaller investments tax relief of 50%, plus the proceeds are not subject to CGT, is available under the SEIS. It’s a fantastic way to help the environment- friendly companies and leave your money to do the work for you.
Green Mortgages
A number of UK-based lenders now have green mortgages, which provide you with financial benefits when you purchase homes with energy efficiency or carry out environmentally friendly refurbishment. You might get lower interest rates or even cashback. It’s worth shopping around for deals if you’re in the market for a new home or planning big upgrades.
TaxGem’s Tips on How to Get the Most Out of Green Tax Breaks
1. Get Advice: Get in touch with a tax professional who can help you understand and make the best choices and savings
2. Check Your Eligibility: Not every investment qualifies for a tax break, so double-check before committing
3. Keep Records: Save receipts, invoices, and proof of installation. You’ll need these when it’s time to claim your tax breaks
4. Stay Updated: Green incentives change all the time. Keep an eye out for new schemes or changes to existing ones
Why Go Green?
It’s not only about saving costs, making eco-friendly investments helps reduce your carbon footprint and support a more sustainable future. Whether insulating your home, switching to an electric car, or backing a green start-up, every step makes a difference.
The UK government is serious about its net-zero targets, and whether you’re a homeowner, business owner, or investor, there’s a benefit for everyone.
To get expert help on how to get the most out of your savings, contact the team here at TaxGem. We’ll help you get every penny’s worth out of your green investments.
