Changes to Company Car Tax in 2020

3 years, 2 months ago by Oliver Atkinson

Coming in April 2020, HMRC will be introducing a new measure aimed at reducing carbon emissions from company cars by providing a zero benefit in kind (BIK) tax rate on electric cars. Whilst the current rules and rates in place for regular vehicles will not change, the hope is that more companies will adopt a greener approach when purchasing for their company fleets by taking advantage of this new zero tax charge.

Zero Tax Charge

Any cars purchased on or after the 6th April 2020 that can be driven on electric power alone for 130 miles or more with emissions up to just 50kg/km will be eligible for the new charge. For any cars bought before the 6th April 2019 the vehicle must be completely electric with zero emissions in order to qualify. This new rate will apply only to the 2020-21 Tax Year, with a 1% charge due in 2021-22 rising to 2% in 2021-22. At present it doesn’t look like HMRC has plans to raise this further but the benefit of a 2% charge over the 15% charge for the lowest petrol equivalent speaks for itself.

Rates for low emissions vehicles

Along with the zero tax charge for qualifying vehicles, HMRC are also introducing a new set of benefit in kind rates for vehicles that do not qualify, but are classed as low emission vehicles. These rates will vary dependant on their total mileage range using solely electric power and can be viewed in the table below.