WHY YOUR NEXT COMPANY CAR SHOULD BE AN EV
Tax changes to benefit EVs Promotes zero emissions tech
COMPANY car drivers who choose an electric car will pay no Benefit-in-Kind (BiK) tax next year, after HM Treasury announced it would change the rules in light of new emissions regulations.
That means an employee in the 40 per cent tax bracket who chooses a Tesla Model 3 instead of a BMW 320d will save more than £4,500 in tax in the 2020/21 financial year. Even drivers who choose a plug-in hybrid like the Mercedes C 300 de will be almost £3,000 worse off than those going for a pure-EV.
The change follows the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). These are more stringent emissions tests than the NEDC regime they replaced, so higher on-paper emissions readings are recorded. While company car tax is currently calculated using the more lenient NEDC emissions-test data, from 6 April 2020 these calculations will be based on WLTP numbers.
To prevent drivers being unfairly penalised, the Treasury is reducing almost all BiK band rates by two per cent. And because electric cars were due to be taxed at two per cent in the next financial year, this will see EV drivers escaping company car tax entirely.
The move is expected to stimulate electriccar registrations, as well as adding more stock to the used EV market in the future. The reduced rate applies to cars registered before or from the start of the next financial year, on 6 April 2020. Subsequently BiK for EVs will rise to one per cent in tax year 2021/22 and two per cent in 2022/23.
Any PHEV capable of travelling more than 130 miles on electricity and with emissions below 50g/km will also qualify – although no model currently on sale can achieve that.
The Treasury says it “recognises the value of the company car market in supporting zero-emissions technology”. By encouraging more company car drivers into low-emissions cars, it says that it can help generate “a competitive used market in these vehicles”.