Company car drivers choosing a pure electric vehicle will pay no benefit-in-kind (BIK) tax in 2020/21, the Government has said.
HM Treasury has replaced the previously published BIK rates for 2020/21 with two new BIK tables for company car drivers; a table for those driving a company car registered after April 6, 2020, and one for those driving a company car registered before April 6, 2020.
HM Treasury says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points.
That means for a pure electric vehicle with zero tailpipe emissions, company car drivers will be taxed at 0 per cent, paying no BIK tax at all.
Furthermore, the zero percentage rate is also extended to company car drivers in pure electric vehicles registered prior to April 6, 2020, who were already looking forward to a much reduced rate of 2 per cent for 2020/21.
The 0 per cent rate will also apply to company cars registered from April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more.
Both will then increase to 1 per cent in 2021/22 and 2 per cent in 2022/23.
Pure electric company cars registered before April 6, 2020, will also increase to 1 per cent and 2 per cent in subsequent years, 2021/22 and 2022/23.
However, 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 per cent BIK rate in 2020/21 and stay the same for the two subsequent tax years.
From 2023/24, fleets will have one BIK tax table again as the rates are realigned.
The Government said: “By providing clarity of future the appropriate percentages, businesses will have the ability to make more informed decisions about how they make the transition to zero emission fleets.
“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.”
According to HMRC figures there were 890,000 company cars in use in the UK in 2017/18.
Got a Question?
We're always happy to help.