Paul Roe FCCA
- Business Advisory Partner
- +44 (0)330 124 1399
- Email Paul
If the answer is “yes” each time you see your tax code taking large amounts of PAYE for the company car that you drive, redemption may not be far away. It may however require a change in thinking and behaviour, which is exactly what is intended by the changes in the company car tax regime being introduced in April 2020.
Most of us remember the encouragement we were given through the tax system to steer us away from petrol engines to diesel. From next tax year we will be encouraged to change to electric or low emission cars. As outlined below, the sizeable tax saving, which will be available, should make you at least consider switching to “cleaner” cars.
Petrol and RDE2 compliant diesel cars:
Electric and hybrid cars:
What are the Rates for 2020/21 to 2022/23 inclusive?
From 6 April 2020, two benefit scale tables are being introduced, which in most bands distinguish between cars registered before or on/after 6/4/20, as follows:
That is worth repeating, in 2020/21 0% on electric cars whether registered before or after 6 April 2020 AND on the lowest band on new hybrids from that date!
That is only scheduled to last a year, but the two subsequent tax years will still be very enticing. The rate for fully electric cars, whether registered pre or post 6/4/20, increases:
The rates for cars emitting up to 50 grams CO2/km with at least 130 miles electric only range will differ depending on whether registered before or on/after 6/4/20, as follows:
Registered before 6/4/20:
Registered on/after 6/4/20 will match the rates for fully electric cars at:
Considerably reduced rate bands are also being introduced for new hybrids below 50 grams CO2/km with more limited electric-only range, so they too will be worth considering post 6 April 2020.
Any of these new rates would mean a significant reduction in your company car tax bill. Do the sums yourself, apply 0%, 1% or 2% instead of your current % to the list price when new, multiply that by your marginal tax rate, and you will see a considerable amount extra flowing into the family coffers.
Alternatively, you may consider this gives opportunity for additional company cars, where you are taxed at a low rate but also providing a safe car for a family member that won’t (some Tesla’s aside) allow silly speeds and rates of acceleration? That may appeal for your young ones newly embarking on their driving experiences.
There’s more:
Rules already exist to allow employers to install charging facilities for electric and plug-in hybrid cars and vans, provided:
Once installed, this is specifically exempted from an income tax charge on employees as a BIK.
So, provided you’re confident that electric and low emission car ranges are sufficient for your needs, taking another look at these cars will soon become very worthwhile for tax purposes, as well as reducing your carbon footprint and impact on the planet. It is however a complicated area so please contact Paul Roe, Partner here or on +44 (0)330 124 1399 if you would like to learn more.
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