The positive changes to company car tax that were introduced from April 2020 – the strong encouragement to choose ultra low emission or zero emission vehicles via exceptionally low BIK taxation for company car drivers – continued with the latest Budget delivered by Chancellor Rishi Sunak (03 March 2021).
Not by what the Chancellor introduced or changed, funnily enough, but the very welcome fact that the rates were left happily alone.
“Apart from the Super Deductions that were introduced, which could affect how businesses decided to acquire commercial vehicles, the Chancellor’s Budget left the critical taxes affecting company cars to their own devices. Which is a good thing,” commented Mike Manners, Managing Director of CBVC Vehicle Management.
“The Government has already signposted the path towards zero emission motoring and with a stable four years of tax incentives mapped out, fleets must take the opportunity to go electric now, or miss out on valuable savings for both the company and its employees.”
Here are the details of the Budget and how they affect business motoring.
Company car tax rates for zero emission cars are
- 2021/22 1%
- 2022/23 2%
- 2023/24 2%
- 2024/25 2%
CBVC comment by Mike Manners
“We’ve already had a year of 0% BIK on zero emission electric cars, and with a clear path to 2024/25 there is every incentive for company fleets to transition to electric vehicles where practical as soon as is possible. The opportunity to take advantage of the Plug-in Car Grant, which is still available, should not be passed up, either.”
Company car tax rates for ultra low emission cars are
[table type=”standard_minimal”] [trow] [thcol][/thcol] [thcol]2021/22[/thcol] [thcol]2022/23[/thcol] [thcol]2023/24[/thcol] [thcol]2024/25[/thcol] [/trow] [trow] [tcol]1-50g/km >130 miles[/tcol] [tcol]1[/tcol] [tcol]2[/tcol] [tcol]2[/tcol] [tcol]2[/tcol] [/trow] [trow] [tcol]1-50g/km 70-129 miles[/tcol] [tcol]4[/tcol] [tcol]5[/tcol] [tcol]5[/tcol] [tcol]5[/tcol] [/trow] [trow] [tcol]1-50g/km 40-69 miles[/tcol] [tcol]7[/tcol] [tcol]8[/tcol] [tcol]8[/tcol] [tcol]8[/tcol] [/trow] [trow] [tcol]1-50g/km 30-39 miles [/tcol] [tcol]11[/tcol] [tcol]12[/tcol] [tcol]12[/tcol] [tcol]12[/tcol] [/trow] [trow] [tcol]1-50g/km <30 miles[/tcol] [tcol]13[/tcol] [tcol]14[/tcol] [tcol]14[/tcol] [tcol]14[/tcol] [/trow] [/table]
CBVC comment by Mike Manners
“As with zero emission company cars, drivers who feel unsure about going the fat free fully electric can opt for an ultra low emission car, enabling drivers to have zero emission mode around urban areas and no fear of running out of charge on longer journeys. The BIK is more complex as it depends on both a car’s CO2 emissions and the number of miles it can travel in battery only mode. But with some of the latest premium manufacturers offering up to 60 miles on the battery, again this is a real opportunity for fleets to reduce their CO2 footprint and drivers to benefit from reduced tax exposure. It should also be noted that the leasing disallowance of 15% now kicks in above 50g/km CO2.”
Salary sacrifice for cars
As with company car taxation rates, the Treasury didn’t meddle with the Optional Remuneration Arrangement (OpRA) CO2 threshold. This stays at 75g/km, suggesting interest in such arrangements will continue to accelerate.
CBVC comment by Mike Manners
“Salary sacrifice offers considerable income tax and NIC advantages, particularly with zero emission vehicles, so we’re expecting heightened interest from fleets opting for a salary sacrifice offering.”
Super deductions offer tax effective way to acquire vans
Super deductions were a novel introduction by the Chancellor in the Budget, offering a 130% first year allowance for main pool expenditure with effect from April 2021. The window for super deductions is from April 2021 to April 2023. It offers the opportunity for companies to cut their tax bill by up to 25p for every £1 they invest. Not available to cars, but can be used to invest in electric charging facilities at work premises. However, when a qualifying main pool asset is sold, that tax due on the sale price will be 130%.
CBVC comment by Mike Manners
“This is an excellent opportunity to acquire brand new vans on hire purchase or a contract purchase basis. The super deduction does not apply to used vans or leased vans so a deferred purchase is the way forward. There’s a clear window of opportunity for impressive tax allowances.”
Capital allowances reduce on purchased company cars
Although the capital allowance changes were introduced in last year’s Budget, the Chancellor confirmed that the changes will go ahead from April 2021 until April 2025. The changes are:
- 100% first year allowance for zero emission cars;
- the annual rate of 18% for main pool expenditure will only apply to cars with CO2 emissions between 1-50g/km; and.cars with emissions exceeding 50g/km will only qualify for special rate expenditure at the annual rate of 6%.
CBVC comment by Mike Manners
“The changes to capital allowances – particularly affecting those cars with CO2 emissions beyond 50g/km – really do make the argument for leasing rather than purchasing much stronger. If you are in any doubt, you should read our analysis With capital allowances on business cars changing, is now the time to save by leasing?.”
Other Budget changes
Van benefit charge
From 06 April 2021 the van benefit charge rises in line with inflation to £3,500 (from £3,490), but zero emission vans are exempt from the charge.
Fuel benefit charge
From 06 April 2021 the multipliers rise in line with inflation, to:
- van benefit fuel multiplier – £669 (from £666); and
- car fuel benefit multiplier – £24,600 (from £24,500).
Fuel duty
For fleets with petrol and diesel fleets, the fuel duty on petrol and diesel has been frozen again. There has been no increase in fuel duty for 11 years.
Vehicle Excise Duty (VED)
Apart from zero emission cars and vans, which remain exempt until April 2025, the following changes in VED (road tax) apply from April:
- first year rate for cars registered from 01 April 2017 increases by up to £70;
- standard rate increases by £5; and
- the ‘expensive car’ supplement (cars with a list price in excess of £40,000) increases by £10.
