Company car tax changes – Government will remove BIK company car tax on Electric Vehicles from 2020/21

15th July 2019

The government has provided positive news for Company car drivers announcing that a pure electric vehicle (EV) will no longer pay benefit-in-kind (BIK) tax in 2020/21 following a review which looks set to boost sales of emissions-free cars.

HM Treasury’s response to its review of the fallout from the roll-out of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) introduced on September 1 last year, and its effect on vehicle taxes, has removed the previously published BIK rates for 2020/21

In place of the old taxation system two new BIK tables for company car drivers have been introduced, one for those driving a company car registered after April 6, 2020, and one for those driving a company car registered before April 6, 2020.

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 aims to announce appropriate percentages at least two years ahead of implementation to provide certainty for employers, employees and fleet operators.

There is plenty to consider when making a decision on the purchase of company vehicles,  please  take the time to discuss your plans prior to making a decision as every circumstance is different and the tax implications could be significant.

Disclaimer - All information in this post was correct at time of writing.
Other Blogs
Paul Jefferson
18th April 2024 Beware of VAT refund fraud

Beware of VAT refund fraud!   We have become aware of several recent cases where taxpayers’ bank account details have been amended on the HMRC portal, without their knowledge, so that VAT repayments have been fraudulently diverted to a third party.   It seems that HMRC have been acting on the basis of a fraudulent…

Andrew Band
17th April 2024 Whitings 2024 Annual Farming Seminar

Our Whitings 2024 Annual Farming Seminar is just around the corner.   Farming always has to cope with changing environment, weather, commodity prices, political changes, etc. This year these challenges feel heightened and this is why we are pleased to welcome back speakers from the Andersons Centre to inform us of these changes and what…

Amanda Newman
17th April 2024 Buy To Let through a Limited Company

There continues to be an ongoing debate when buying a residential property to let out about whether to buy this personally or set up a limited company to own it. Unlike our sole trader v limited company comparisons for a trading business there is not a clear division based on profits. There are a lot…

Nick Edgley
11th April 2024 Do you need to re-register for Child Benefits?

If you’ve heard about the changes post 5 April 2024 and are wondering whether you need to re-register for Child Benefits, this is the blog post for you.   If you have been affected by the increase in the High Income Child Benefit Charge cap to £60,000, then you may need to restart your Child…

Peter Brown
10th April 2024 Pension Contributions for directors

Are you thinking about planning ahead for retirement and want to find out more about Pension Contributions for directors?   When it comes to planning for your retirement, Company pension contributions can offer significant benefits in terms of reducing your company’s Corporation Tax bill. Here’s how you can use both personal and company contributions to…

Angelica Ferentinos
9th April 2024 Child Benefit changes – What you need to know

The new Child Benefit changes came into effect on 6 April 2024, with families receiving up to £1,331 per year (for the first or only child), and up to £881 per additional child, increasing by £83.20 and £54.60 respectively on the year before. This is paid directly into your bank account every 4 weeks. There…