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Electric cars exempt from company car tax next year

Hugo Griffiths 2019-07-10 10:09

UK’s million or so company car users will escape Benefit-in-Kind tax if they have an electric car in the 2020/21 financial year

Company car users who drive an electric car will not have to pay any Benefit-in-Kind (BiK) tax during the next financial year, after the Treasury reviewed tax rules.

The change follows the introduction of the WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions regulations, which are more stringent than the NEDC regime they replaced. Because BiK rates are based on CO2 outputs, and WLTP sees higher on-paper emissions recorded, company car users faced a potentially significant hike in the BiK rates they faced.

Everything you need to know about company car tax

To offset that rise, the Treasury has replaced previously published BiK rates for the 2020/21 financial year with new tables that see most BiK percentage bands reduced by two points.

Electric cars were due to get a two per cent BiK rate in 2020/21, so the changes will mean drivers choosing an EV as their company car will pay no Benefit-in-Kind rate whatsoever for that financial year. The tax exemption applies to EVs registered from 6 April 2020, and those registered before that date.

Any plug-in hybrid capable of travelling for 130 miles or more on battery power and with emissions below 50g/km will also escape the tax – though no PHEV currently on the market has that range. The BiK rate for EVs and plus-150-mile PHEVs will rise to one per cent in FY 20201/22, and two per cent in FY 2022/23.

The Treasury says it “recognises the value of the company car market in supporting the transition to zero emissions technology” and also considers that by encouraging more company car drivers into low-emission cars, it can help generate “a competitive second-hand market in these vehicles.”

Is the waiving of electric car company car tax a progressive move by the government? Have your say in the comments…

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