Electric vehicles will now have a zero Benefit in Kind (BIK) company car tax rate from April 2020. This is a reduction from the 2% rate that was planned. The current rate is 16%.
The government has taken this decision after reviewing the impact of the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).
For cars first registered from 6 April 2020, most company car tax rates will be reduced by two percentage points. This will mean that pure EVs will have a rate of 0%, and this will also apply to pure EVs registered before this date. The rate will increase to 1% in 2021-22 and 2% in 2022-23.
This is likely to significantly increase demand for EVs from companies from April 2020. Vehicle availability is a challenge at the moment, but this situation is due to improve over the next 6-12 months.
Apart from EVs with 0g/km emissions, BIK tax rates for all cars will be frozen at 2020-21 levels in 2021-22 and 2022-23.
A plug-in hybrid with 1-50g/km emissions and an electric range of less than 30 miles will pay 14% BIK in 2020-21 – and the same for the subsequent two years.
In comparison a car with CO2 emissions of 160g/km and over will pay 37% BIK for the period 2020 – 2023.
The 0% rate will also apply to company cars registered from 6 April 2020 with emissions from 1-50g/km and a pure electric 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 6 April 2020 will also increase to 1% and 2% in subsequent years, 2021/22 and 2022/23.
Commenting on the BIK rate changes, Mike Potter, Managing Director of DriveElectric says: “At DriveElectric we’re pleased that at last HMRC has taken notice of the advice from the fleet industry.
“By making this positive change, HMRC is increasing accessibility to EVs and enabling the industry to grow. Company cars turn into cars which feed the used car market, which in turn make EVs more available and affordable for consumers. This decision from HMRC could kickstart a pure EV uptake.
“Now is the time for car manufacturers to provide vehicles at the right price so the industry can take full advantage of this incentive.
“From our research we know that the infrastructure for charging is not an issue for the majority of prospective EV users who can charge at home. Most EVs only require one daily charge: range anxiety is now a thing of the past.”
There is still no clarity on rates beyond 2022-23, but the government says it aims to announce rates at least two years ahead.