DIALING DOWN THE CO 2

“Company car drivers who choose an EV will save thousands compared with the driver of a comparable diesel”

What about electric cars?

PURE electric cars will not be subject to any Benefit-in-Kind tax at all for 2020/21 – regardless of when the car was registered. In 2021/22 they will attract a BiK rate of only one per cent, and in 2022/23 just two per cent. This means company car drivers who choose an EV will save thousands compared with the driver of a comparable diesel.

What about the diesel surcharge?

DIESEL cars not meeting the RDE2 element of WLTP tests will continue to be subject to a four per cent higher BiK rate than petrol cars. A number of makers – including Jaguar Land Rover, BMW, Mercedes and Vauxhall – produce RDE2-compliant cars, though, so it’s still possible to take advantage of the reduced tax rates that diesels incur thanks to having low CO2 emissions compared with their petrol equivalents.

So is now the time to choose a pure-electric or plug-in hybrid company car?

YES, if you can. EVs have the most attractive BiK rates, but plug-in hybrids (PHEVs) also attract less tax. A ‘typical’ PHEV, for example, can do around 25 miles on battery power alone and will have 49g/km CO2 emissions; such a car would attract a BiK rate of just 12-14 per cent. A typical petrol might emit 130g/km of CO2, attracting a BiK rating of 29-31 per cent, while a typical non-RDE2-compliant diesel might emit 105g/km, making its owner liable for a 28-30 per cent BiK rate.

What about road tax? Isn’t that increasing as well?

IN much the same way as with company car tax, WLTP measurements are replacing NEDC CO2 readings for road tax (vehicle excise duty) from this year – although from 1 April rather than 6 April.

But while BiK rates apply every year for company car drivers, only the first year of road tax is linked to CO2 emissions, with a flat rate for following years. Because of this, and because of the fact first-year road tax costs are typically lumped into a new car’s on-the-road price, any increased charges related to WLTP being used for road tax rates will not hit buyers as sharply in the wallet.

If, for example, a car with NEDC CO2 emissions of 115g/km has 138g/km CO2 emissions thanks to WLTP (a 20 per cent increase), customers would have to make an extra one-off payment of £40 compared with when NEDC figures were used. However, it should be highlighted that some jumps are bigger. A car with NEDC CO2 emissions of 150g/km might increase to 180g/km under WLTP, which would result in its first-year road tax increasing from £210 to £855.