Fleet News

No company car tax on electric vehicles, says Government

row of electric cars outside houses of parliament

The Government says 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 its review of WLTP and vehicle taxes, to which Fleet News is listed as a respondent, HM Treasury has binned the previously published BIK rates for 2020/21.

Instead 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 (see below).

HM Treasury says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points.

That means for a pure electric vehicle with zero tailpipe 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.

However, company cars registered before April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more attract a 2% BIK rate in 2020/21 and stay the same for the two subsequent tax years.

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.”

FOR THE LATEST ON THE NEW COMPANY CAR TAX RATES, INCLUDING UNCERTAINTY ABOUT THEIR IMPLEMENTATION, CLICK HERE.

Ashley Barnett, head of fleet consultancy at Lex Autolease, said: “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, a vital part of its Road to Zero strategy.

“It is really good to see that 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.”

The fleet industry was asked earlier this year to respond to a series of questions around whether vehicle tax changes are required once the new emissions testing regime, WLTP, is adopted for tax purposes from April 2020.

Initial evidence provided by manufacturers suggested that more than 50% of cars will see an increase from NEDC-correlated emissions values to WLTP of between 10% and 20%. Fleet News had seen increases as high as 30% in some cases.

For company car drivers and fleet operators choosing a new car from April 2020, this could have resulted in an increased tax liability, compared to an identical model. The Government hopes this new approach avoids that anomaly.

The 4% diesel premium on published BIK rates remains, but cars classed as RDE2 will still be exempt from the charge.

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.”

Simon Carr, chief commercial officer at Alphabet (GB), also welcomed the reduction in the tax burden for most company car drivers. 

He said: "It recognises the important role that businesses and employees play in the transition to ultra-low and zero emission vehicles. 

"From a fleet perspective, it adds a layer of complexity which decision makers will need to understand the operational impacts of prior to communicating with their employee community.

"On an optimistic note, the announcement of 0% BIK tax rates for pure battery electric vehicles from April 2020 - followed by 1% in April 2021 and 2% in April 2022 - could see a renaissance for the company car and give us real momentum on the road to zero. 

"Let’s also remember that plug-in hybrids are still a vital tool for the transition towards mass electrification for many organisations and although they will benefit from this 2% BIK reduction, we hope to see further practical and financial support for these vehicles in the Autumn Budget."

He continued: "It seems that Government has also listened to the voices of industry, business and consumers over recent years and provided some clarity on company car taxation up to April 2023. 

"We look forward to further details being published on Thursday but on the face of it this is a hugely positive move for electric vehicles in the UK."

The news was similarly welcomed by Zenith. Claire Evans, head of fleet consultancy at Zenith said: "It is especially pleasing that the electric rate has been reduced for electric cars to zero benefit-in-kind tax (BiK) in 2020 with a commitment to low tax rates for the following two years, which see a year-on-year 1% increase. 

"No doubt with the ever-increasing releases of hybrid, plug-in and electric cars this commitment to lower tax will provide attractive cost options for perk company car drivers, particularly those paying higher rate tax, or for employees with the option to obtain a new, clean, cost-efficient car through a salary sacrifice car scheme.

"Whilst for some cars the move to WLTP may still result in a higher company car tax after the announced 2% reduction, it is important to remember that the cleanest RDE2 compliant diesels will also see a fall of 4%, meaning that clean diesel cars will see an overall reduction in company car tax from April 2020. Great news for businesses where diesel is still the most efficient option for drivers who complete higher mileages.

"Today's announcement is a clear sign that Government recognises the pivotal role fleet vehicles play in achieving the objectives set out in the 'Road to Zero'." 

Today’s changes, however, do not affect the lease rental restriction, capital allowances or any other CO2 related taxes and incentives, but will include fuel benefit charge.

The Government says that existing vehicle excise duty (VED) rates – also not part of this review – will stay the same from April 6, 2020, despite the introduction of WLTP values for tax purposes from this date.

The Government says that a call for evidence for VED will be published later this year, seeking views on moving towards a “more dynamic approach to VED”, which recognises smaller changes in CO2 emissions.

Will the 0% BIK rate for pure EVs persuade you to make the switch? Have your say in the Fleet News poll.

Company car tax for cars registered before April 6 2020

 

Cars first registered before 6 April 2020        
CO2 (g/km) Electric range (miles) 2020-21 (%) 2021-22 (%) 2022-23 (%)
0 N/A 0 1 2
1-50 >130 2 2 2
1-50 70-129 5 5 5
1-50 40-69 8 8 8
1-50 30-39 12 12 12
1-50 <30 14 14 14
51-54   15 15 15
55-59   16 16 16
60-64   17 17 17
65-69   18 18 18
70-74   19 19 19
75-79   20 20 20
80-84   21 21 21
85-89   22 22 22
90-94   23 23 23
95-99   24 24 24
100-104   25 25 25
105-109   26 26 26
110-114   27 27 27
115-119   28 28 28
120-124   29 29 29
125-129   30 30 30
130-134   31 31 31
135-139   32 32 32
140-144   33 33 33
145-149   34 34 34
150-154   35 35 35
155-159   36 36 36
160+   37 37 37

 

* 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

Cars first registered from 6 April 2020        
CO2 (g/km) Electric range (miles) 2020-21 (%) 2021-22 (%) 2022-23 (%)
0 N/A 0 1 2
1-50 >130 0 1 2
1-50 70-129 3 4 5
1-50 40-69 6 7 8
1-50 30-39 10 11 12
1-50 <30 12 13 14
51-54   13 14 15
55-59   14 15 16
60-64   15 16 17
65-69   16 17 18
70-74   17 18 19
75-79   18 19 20
80-84   19 20 21
85-89   20 21 22
90-94   21 22 23
95-99   22 23 24
100-104   23 24 25
105-109   24 25 26
110-114   25 26 27
115-119   26 27 28
120-124   27 28 29
125-129   28 29 30
130-134   29 30 31
135-139   30 31 32
140-144   31 32 33
145-149   32 33 34
150-154   33 34 35
155-159   34 35 36
160-164   35 36 37
165-169   36 37 37
170+   37 37 37

 

* 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

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Comments

  • Sage & Onion - 09/07/2019 16:32

    At long last! Welcome news. I'm not sure I agree with the 4% penalty still being in place for cars with co2 measured on WLTP though. And are diesel hybrid models still exempt from the 4% diesel penalty? I expect this system of two tables is going to play havoc with P11D calculations or software that calculates the BIk value.

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    • rosco7 - 10/07/2019 09:06

      Diesel hybrid models will avoid the 4% RDE2 tax if they are RDE2 compliant. And you are correct, it will be a bit challenging to have two tax tables, but at least we have something.

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  • rosco7 - 10/07/2019 09:05

    So if my calculations are correct, they have given WLTP an average 10-15% differential over NEDC. I suspect the true difference is closer to 25% and in some cases much more. Also, for those poor people who had no option but to choose a pre RDE2 compliant diesel they could only benefit by writing off the 1-2 year old car, as they probably have about 3 years left on the contract. I do wonder why this took so long for the treasury to announce, it is hardly revolutionary. Anyway, too late now for the companies who have closed the car scheme and gone allowance. But I sense an opportunity for Salary Sacrifice on EV's.

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  • Glenn Ewen - 10/07/2019 11:44

    I would argue that anyone that can make use of a pure electric car probably doesn't do enough miles per year to warrant having one, or their job is of limited in range. It encourages perk cars more than job needs. Still cart before horse as no proper infrastructure in place yet. Strikes me as a simple virtue signalling exercise with no real structured plan for the future.

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    • rosco7 - 11/07/2019 09:25

      Yes, this is the problem. As EV's are at least £7k more expensive (with the PiCG included) than an equivalent ICE car. You can only get an equitable TCO in a high mileage scenario. However, with more realistically priced EV's and the increases in production volumes driving lower prices, as well as EU manufacturers getting close to large fines for average CO2, I can see a lot of lower cost EV's becoming available. There are some better options though. A Tesla Model 3 is fairly close on price to a BMW 3-Series, Mercedes C-Class or Audi A4, so with reduced fuel costs and low service costs, this may work. Of course our friends at the treasury are only giving us a vision for 3 years, and after that there are no promises on EV's BiK rates, so as availability increases, expect the BiK % to increase accordingly.

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  • Paul Gauntlett - 12/07/2019 11:43

    On the whole this is fantastic news. Clarity and certainty for planning and evaluation when before there was only frustration and uncertainty. This is a shot in the arm for EV's and sends a very clear message on the direction of travel that corporate fleets should be taking where possible. On that point every company car driver with a renewal coming up needs their head testing if they don't want a full EV or Plug In Hybrid! That of course will cause fleet managers a real challenge as availability simply does not correspond. Fleet managers will also realise that not every driver is suitable for Plug In Vehicle - although there are some excellent on line tools to help fleet managers evaluate drivers suitability. The implications of a much greater EV take-up will also extend further than fleet. Companies will need to think more about Mobility - full EV drivers will need the option to take the train for longer trips - and that opens up a whole new subject on Rail Capacity and Rail Fares. Like most things in life - changing any one think has a knock on effect. Back to the original point though this is good news and whilst the manufacturers will need a bit of time to catch up with demand we are genuinely now in a fast track road to zero revolution!

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  • Sage & Onion - 07/10/2019 16:43

    Is there any clear guidance on where fleet operators and other businesses are to take their vehicle data from with regards to battery range for PHEV's for BIK purposes? Do we just take the manufacturers published figures as these aren't shown on the V5 document? But even manufacturers declared electric range can be very vague where they can state, for example, 39-41 miles. That might not sound too relevant but for cars registered before April '20 its the equivalent to a 33% difference in tax payable by the driver if the driver ends up with a 39 mile range compared to a 41 mile range. Will there be a VCA-style reference guide to pick this info up from or will we all have to demonstrate to HMRC what the actual electric range is on each car model? Or will the V5's be updated on existing PHEV's to show this electric range?

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  • Becky - 23/10/2019 15:35

    This is very narrow minded of the government!! There is too much focus on forcing elecrtic cars onto people rather than pushing/incentivising manufacturers to produce alternative fuel or zero emission vehicles. Electrc vehicles are not going to be suit everybody and it's not a onesize fits all type of product. Everyone manufacturers included MUST look at a range of alternatives to suit the different needs of the UK market, there is not currently only one fuel type vehicle so why does everyone seem to think having just one alternative will work?? Come people wake up to the fact that electricity is not the only long term solution to the emissions debate!

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