The long-awaited results of the Government’s WLTP review have brought a freeze on company car tax, a 2% tax cut for vehicles registered after next April and the introduction of a zero Benefit-in-Kind rate for fully electric cars.
The announcements came following a Government review into the impact of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) on vehicle taxes which closed in February.
The changes mean that those drivers with vehicles registered before 6 April 2020 will see their company car tax bands frozen at the 2020/21 rates until 2022/23.
Meanwhile, those registering new cars after 6 April 2020 will be rewarded with a 2% tax cut. From 2023/24, all drivers will pay the same rates, regardless of when the cars were registered, although percentages for this year onwards remain under review and will be announced in the future.
The moves are to cushion the expected impact of rises in CO2 emissions and therefore company car tax for most cars as they switch to the WLTP testing regime.
At the same time, company car drivers choosing a pure electric vehicle (EV) will pay no benefit-in-kind (BIK) tax in 2020/21 and then 1% the following year and 2% in 2022/23.
And in further good news, RDE2 -compliant diesels will continue to be exempt from the 4% diesel surcharge.
As what is being seen as a shot in the arm , for EV take-up, company car drivers of a pure EV with zero tailpipe emissions will be taxed at 0% in 2020-2021, paying no BIK tax at all. 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.
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. See tables below.
From 2023/24, company car drivers will be able to refer to BIK tax table again as the rates will be realigned.
The Government says that “by providing clarity for the future, 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.
The Government also added that existing vehicle excise duty (VED) rates – 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.
Mike Manners, managing director at CBV Vehicle Management, said: “The lack of clarity on the long-term tax regime for company cars has held back sales and caused uncertainty in the market, which has been shown in the most recent car registration figures from the SMMT.
“The Government announcement brings much-needed certainty and allows fleet managers and company car drivers to plan for the future, confident that the new rates won’t be ripped up next week.
“Hopefully, the news of zero rates for EVs will kick-start the EV market which has been waiting for some kind of stimulus, while it is also great news that the newest generation of clean diesels will not suffer a 4% surcharge, as we believe that diesel still has a part to play in the fleet mix,” he said.
Mr Manners continued: “The Government announcement should hopefully be a much needed shot in the arm for most drivers and recognises the important role that companies play in the move towards a zero carbon future.
“However,the new tax regime adds a layer of complexity which decision-makers will need to understand before communicating with their drivers, and we would urge fleet managers to talk to their fleet management supplier as soon as possible to understand the full impact of the new moves,” he said.
