No benefit in kind tax for pure electric company cars in 2020/21

Added: 12 September 2019

Changes to the UK’s company car tax system will mean drivers choosing pure electric cars will pay no benefit-in-kind charges in 2020/2021.

After an evaluation of the industry changes brought about by the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions regulations, the Treasury has axed its previously published rates in favour of a new system.

It will mean that, for cars registered from April 6th next year, most benefit-in-kind rates will be reduced by two percentage points over the current system. For EVs, that means a zero-percentage rate, which is also extended to vehicles registered prior to April 6th. 

This figure will also apply to hybrids and plug-in hybrids that are capable of 130 miles or more of pure electric range, with official CO2 emissions of between 1-50g/km - although no such models currently exist in the UK market. Current plans are for the 0% rate to increase to 1% by 2021/22 and 2% in 2022/23, although the government declares they “remain under review”.

The lack of clarity on the long-term tax regime for company cars has severely hampered uptake, clearly reflected in the most recent car registration figures from the SMMT and the reduction in the number of people paying company car taxation. Today’s announcement gives a degree of much-needed certainty to company car drivers and fleet managers. Coupled with the EV infrastructure announcement, it is a welcome sign of the Government’s commitment to stimulating company car uptake and getting newer, cleaner vehicles on the roads.

Benefit in Kind (BIK) will be 0% on EVs from April 2020 with this increasing by 1% to reach 2% in 2022-23 regardless of registration date. The freeze on BIK for vehicles under NEDC at 2020-21 levels for two years is also welcome news for the fleet industry. This, coupled with RDE2-compliant diesel vehicles being exempt from the 4% diesel supplement, gives clear foresight for company car fleet decision makers.

Will the 0% BIK rate persuade you to change to electric?

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