A Government review leading to changes to BIK Tax will likely see more company car drivers move to greener vehicles in 2020/21.
Company car drivers that choose an (EV) electric vehicle with zero emissions will pay no benefit-in-kind (BIK) tax in 2020/21. With car manufacturers competing for corporate sales, this step will benefit those that have embraced the technology.
Two new BIK Tables have been released to replace those previously published. One will be for company cars registered before April 6 2020 and one for cars registered after 6 April 2020. HM Treasury says that for those registered after April 6, 2020, most company car tax rates will be reduced by two percentage points. Ultimately it means that pure electric vehicles whole tailpipe emissions are zero, will not cost the company car driver any BIK tax in 2020/21.
The zero percentage rate will be extended to company car drivers in pure electric vehicles registered prior to April 6, 2020 for the 2020/21 tax year.
However, over the subsequent 2 years these tables will become realigned through the following:
- Company cars registered before April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more attract a 2% BIK rate in 2020/21 and stay the same for the two subsequent tax years.
- Company cars registered from April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more will also enjoy the 0% rate in 2020/21
- These will then increase to 1% in 2021/22 and 2% in 2022/23
- Pure electric company cars registered before April 6, 2020, will also increase to 1% and 2% in subsequent years, 2021/22 and 2022/23.
- From 2023/24, only one BIK tax table will apply again as the rates are realigned
These changes came about as a result of “the impact of the Worldwide harmonised Light vehicles Test Procedure (WLTP) on Vehicle Excise Duty and company car tax”
Company car tax payable by an employee is based on the vehicle’s official value (P11D value) multiplied by the appropriate BIK rate (determined by the car’s CO2 and fuel type) and the employee’s income tax rate (basic rate of 20 per cent, higher rate of 40 per cent or additional rate of 45 per cent). However, the Government wants more incentives to encourage the one million UK company car drivers to shift to electric models.
The Government said that ‘by providing clarity on the future of the appropriate percentages, businesses will have the ability to make more informed decisions about how they make the transition to zero emission fleets’.
It added: ‘Appropriate percentages beyond 2022-23 remain under review and will be announced at future fiscal events.
‘The Government aims to announce appropriate percentages at least two years ahead of implementation to provide certainty for employers, employees and fleet operators.’
If you would like to better understand these changes and how you and your employees could benefit then please get in touch with our experts today.