No tax on zero-emission company cars

Feature

Company car drivers choosing a fully electric vehicle will pay no benefit-in-kind (BIK) tax in 2020/21, the government has said in its response to its review of WLTP and vehicle taxes.

Zero emission models will pay one per cent in 2021-22, and then return to the planned two per cent rate in 2022-23.

For cars first registered from 6 April 2020, most company car tax rates will be reduced by 2ppt in 2020-21 before returning to planned rates over the following two years – increasing by 1ppt in 2021-22 and 1ppt in 2022-23.

The government's response document says: "Appropriate percentages beyond 2022-23 remain under review and will be announced at future fiscal events. The government aims to announce appropriate percentages at least two years ahead of implementation to provide certainty for employers, employees and fleet operators."

BVRLA Director of Policy and Membership, Jay Parmar said: “Recognising the value of the company car market in supporting the transition to zero emission technology is a positive endorsement for our sector, showing refreshing alignment between government’s environmental and fiscal policies.”
 
“The Treasury is giving back some of the unfair Company Car Tax windfall it was set to receive as a result of WLTP and providing some essential extra visibility on future tax costs for those looking to order their next vehicle. This is a good day for company car drivers and our members.”

Existing VED rates will be maintained on introduction of WLTP from April 2020. A call for evidence will be published later this year seeking views on moving towards a more dynamic approach to VED which recognises smaller changes in CO2 emissions.

Background

At Budget 2018, the government announced a review of the impact of the Worldwide harmonised Light vehicles Test Procedure (WLTP) on vehicle taxes which are linked to carbon dioxide(CO2) emissions. The review sought evidence on the impact of WLTP on reported CO2emissions, and views on whether changes are therefore required to Vehicle Excise Duty (VED) and company car tax.

At Autumn Budget 2017, the government announced that cars registered from April 2020 will be taxed based on WLTP figures. WLTP aims to be more representative of real world driving conditions, compared to the previous test known as the New European Driving Cycle (NEDC).

As reported emissions would increase, this could impact VED and company car tax, which is why the government undertook the review.

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