No company car tax from April on pure electric vehicles

HMRC rules from 6 April 2020 mean that company car drivers choosing a pure electric vehicle will pay no benefit-in-kind (BIK) tax in 2020/21.

In its long-awaited response to the review of WLTP and vehicle taxes, HMRC has removed the previously published BIK rates for 2020/21.

Standing in their place it has created two new BIK tables for company car drivers; a table for those driving a company car registered after April 6, 2020, and one for those driving a company car registered before April 6, 2020.

HMRC says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points. This means for a pure electric vehicle with zero emissions, company car drivers will be taxed at 0%, paying no BIK tax at all.

Furthermore, the zero percentage rate is also extended to company car drivers in pure electric vehicles registered prior to April 6, 2020, who were already looking forward to a much reduced rate of 2% for 2020/21.

The 0% rate will also apply to company cars registered from April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more. Both will then increase to 1% in 2021/22 and 2% in 2022/23.

Pure electric company cars registered before April 6, 2020, will also increase to 1% and 2% in subsequent years, 2021/22 and 2022/23.

From 2023/24, fleets will have one BIK tax table again as the rates are realigned.

The Government says that “by providing clarity of future the appropriate percentages, businesses will have the ability to make more informed decisions about how they make the transition to zero emission fleets”.

It added: “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.”

These changes can result in significant tax savings for company car drivers and it is advised to seek appropriate professional advice ahead of the forthcoming changes.

* Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance

* Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance