Greener Car Benefits

  • By Shan Hughes
  • 19 December 2019 10:10

The adoption of new emissions tests in April 2020 will have implications for company car tax. Car benefit rates are being adjusted to lower the Benefit in Kind (BiK) on electric cars.

New emissions test standards

The introduction of the Worldwide harmonised Light vehicle Test Procedure (WLTP) in April 2020 is part of the government’s ‘gear shift’ to greener motoring. The WLTP is more accurate than the New European Driving Cycle (NEDC) test it is replacing, so car manufacturers expect it to show higher vehicle carbon dioxide (CO2) emissions. However, for cars registered before 6 April 2020, the emissions measured under the NEDC tests will still be used.

Government review into impact of new tests 

The government carried out a review into the impact of the WLTP on company car tax generally, and has announced that for most company cars registered after 5 April 2020 car BiK rates will be reduced by two percentage points for 2020/21 from the rates previously announced for that year.  

Additionally, to accelerate the shift to zero-emission cars, all zero-emission models, regardless of when they were registered, will be subject to a 0% rate. Drivers of these Pure Electric Vehicles (PEVs) will pay no company car tax in 2020/21. The 0% rate will rise by a single percentage point in each of the following two tax years.

Driving solely on battery power 

Reduced percentages will apply to lower emissions cars and new performance-related bands are introduced for hybrid vehicles with emissions up to 50 g/km (depending on how far the hybrid vehicle can travel solely under electric power).

Other than the BiK percentage charge for zero-emissions cars, the BiK percentages for cars registered before 6 April 2020 will remain unchanged from the Finance (No.2) Act 2017 and are frozen for 2021/22 and 2022/23. For cars registered from 6 April 2020 tested under WLTP, the percentages increase by one percentage point in 2021/22 and 2022/23. 

Those looking to purchase new company cars need to be aware there are two car benefit percentage tables for 2020/21:

 

CO2 emissions

Appropriate percentage (%)

 

(g/km)

2019/20

2020/21

registered after 5/4/20

2020/21

registered before 6/4/20

0

16

0

0

1 - 50

16

   

 1 – 50 (split by zero-emission miles)

 >130

70-129

40-69

30-39

<30

 

0

3

6

10

12



2

5

8

12

14

51 – 54

19

13

15

55 – 59

19

14

16

60 – 64

19

15

17

65 - 69

19

16

18

70 - 74

19

17

19

75 - 79

22

18

20

80 - 84

22

19

21

85 - 89

22

20

22

90 - 94

22

21

23

For every additional 5g thereafter add 1% until the maximum percentage of 37% is reached.

 

What types of vehicle are available? 

  • Pure electric vehicles (PEVs) use rechargeable batteries and run solely from electrical power rather than an internal combustion engine and are zero-emission vehicles. 
  • A hybrid electric vehicle (HEV) uses power from two sources, one fuelled by petrol or diesel, the other electric. HEVs switch between the two motors and generally have a small electric-only range of a few miles.
  • Plug-in hybrid electric vehicles (PHEVs) recharge their batteries from an electrical source. These vehicles have a higher electric-only range.

This tax regime is designed to encourage the take-up of low and zero-emission vehicles, so now may be the ideal time to advise your clients to consider investing in EVs. 

You can keep your clients updated on the greener car benefits with our letter and briefing. Ordering is easy, simply email sales@mercia-group.com or call 0330 058 7141. 

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