Fully electric and hydrogen-powered cars will pay zero company car tax in 2020/21, instead of the 2% rate previously announced and rising to 1% in 2021/22 and then back to 2% in 2022/23. This is a strong incentive to those thinking about electric, and will comfort those who have already chosen one without knowing what was going to happen in April 2021.
Cars registered before 6th April 2020
The percentages and thresholds previously announced for 2020/21 will remain and continue the same for both 21/22 and 22/23 (apart from the zero emission rate per above). Company car drivers will no doubt feel that these are still very high, but there will be no escalation (other than the 1% uplift from April 2020) over the next four years.
Cars registered after 6th April 2020
WLTP comes into taxation for cars registered from 6th April 2020 and so the figure used for calculating tax will in most cases be higher than if the same vehicle was registered the month before under a correlated NEDC figure. Tax will be applied according to a new WLTP table which is based on a 2 percentage point reduction in 2020/21 and 1% in 2021/22. By April 2022 there will be no difference between the NEDC and WLTP table rates.
Implications for car choice for the 3 years from April 2020
- Drivers will want an electric car because the benefit-in-kind value will be based on just 3% of the P11d price in total for 3 years. This is a huge incentive and many will be disappointed by price list restrictions or lack of supply due to shortage of lithium batteries.
- Plugin hybrids still have tax advantages and manufacturers will be working hard to get the electric range within key thresholds.
- Petrol hybrids still look good for initial price, lowish tax and anti-diesel sentiments.
- Diesel drivers should look out for Euro 6d versions that avoid the 4% pa diesel supplement. Not many are available yet but more are on the way. Euro 6d diesel list
- If you are looking to get a company car in early 2020, it would make sense to compare the tax bill over three years for a car registered before or after 6th April. If the WLTP CO2 figure is much higher than the NEDC one, it would make sense to get a car registered before the changeover.
- For plain diesel and petrol cars, the changes have reduced the impact of WLTP but the extent varies widely by car. For instance the BIK value (salary equivalent) over 3 years on a Mazda6 diesel rises from 90% NEDC through 96% NEDCe to 105% for the WLTP version. A driver would save 9.4% of the company car tax by getting a car registered on 5th April 2020 rather than a day later. On the other hand the petrol version suffered more from the unprotected change from NEDC to NEDCequivalent, and the move to WLTP has been largely adjusted for already. The percentages over 3 years look like NEDC 90%, NEDCe 99% and WLTP 102%. To benefit from the lowest 90% figure you would have to be driving a pre September 2018 model. An earlier article explores the impact of these tests on CO2 figures NEDC V WLTP.
- These measures have yet to be passed into legislation, but seem sensible enough to get through. And despite the number of company cars falling (50,000 on the last year of reported figures) there is still enough escalation to ensure that the revenue take will increase overall.
This is the first time we have started to look at cars in terms of 3 year BIK % but may use it more to illustrate how company car tax works. Drivers should look at the full cycle and 3 years is the most popular length. BIK measures the salary equivalent on which income tax will be applied. From April 2020 the 3 year maximum is 111% of the price of the car, so just 3% for an electric car is astonishingly low. (A doublecab X-Class pickup might be just 23% but that is another story.)