Any company car that has a personal use element is subject to tax as a Benefit in Kind and these taxes increase and decrease depending on the car’s specific engine size and emissions.
In the past, the best alternative to this was purchasing an electric vehicle as they were exempt from taxation but as they have become more popular this has now changed slightly. However low emissions of plug-in hybrid vehicles mean they are still a good alternative with Benefit in Kind rates still far lower than what is charged on conventional cars.
Company Car Tax Changes for Electric Vehicles in 2020/21
In July 2019 the HMRC made the decision to stop the previously published Benefit in Kind tables for 2020/21 and create 2 new ones. One for those driving a company car registered from 6th April 2020 and one for those driving one registered before that date.
The purpose of this is to separate cars that had their emissions tested under the old European Drive Cycle criteria from those tested under the new Worldwide Harmonised Light Vehicle Procedure requirements which tend to produce a higher CO2 reading. Cars registered from 6th April 2020 can expect to see their Benefit-in-kind rates cut by 2% in 2019/20.
The biggest change is the introduction of a 0% Benefit in Kind for Electrical Vehicles from 6th April 2020 although this will increase to 1% In 2021/22 and 2% in 2022/23 – to be eligible for these percentages your hybrid should only emit 1-50g/km of C02 and have a pure electric range of 130 miles
Please note that from 2023/24 onwards there will then just be one Benefit in Kind table again which will realign the rates implemented By the Worldwide Harmonised Light Vehicle Procedure.
If you would like more advice and assistance about the best economic decision about purchasing a company car this would best be discussed with your accountant.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.