Company car tax rate reductions from 6 April 2020
05 February 2020
For company cars first registered from 6 April 2020, the income tax benefit in kind scale rates will be based on CO2 emissions reported under the Worldwide harmonised Light vehicles Test Procedure (WLTP). The WLTP aims to report emission figures in line with those achieved during real world driving conditions. As those figures are higher for many cars than the levels under the system currently in use, the percentages used to calculate the benefit in kind will be reduced in order to ease the transition.
The Government had already planned a drastic cut in the benefit charge for drivers of all zero-emission company cars (including those registered before 6 April 2020): they were originally scheduled to be just 2%. The temporary rate reduction for the introduction of WLTP now means that a scale charge rate of 0% will apply in 2020/21. The rate will rise to 1% in 2021/22 and 2% in 2022/23.
Hybrid cars with emissions between 1-50 g/km
The scale charge rates for 2020/21 onwards for cars with emissions between 1-50 g/km will depend on their zero emission miles range and when they were first registered:
|Electric range (miles)
||First registered before 6 April 2020
||First registered after 5 April 2020
||2020/21 - 2022/23
|More than 130
The rates for most other new cars first registered from 6 April 2020 will be reduced by 2% in 2020/21 before returning to the planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23. So, for example, the rate for a car with a WTLP emissions figure of 95g/km will be 22% in 2020/21 (down from 24%), 23% in 2020/21 (down from 24%), and 24% in 2022/23.
Cars with the greatest CO2 emissions (170g/km and over) will continue to attract the maximum percentage rate of 37% during 2020/21, 2021/22 and 2022/23.
The rates for other cars registered before 6 April 2020 will not change during 2020/21 and will be frozen at the 2020/21 level for 2021/22 and 2022/23.
The percentage rate reductions are a welcome mitigation for the transition to the WLTP emission standards. The ongoing incentives for companies and company car drivers to switch to using electric and hybrid/low emission cars are certainly attractive compared to the high benefit rates for conventional vehicles.