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

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.