Following a recent review of vehicle taxes on company cars at the end of July 2019, and after a consultation in 2018, HMRC released draft legislation which means that drivers of zero emissions electric company vehicles will pay no benefit-in-kind (BIK) tax in 2020/21.

The 0% rate will apply to zero emission company cars for the first year, which will then increase to 1% in 2021/22, and 2% in 2022/23.

The new rates are to ensure that company car tax rates are not increased as a result of the introduction of WLTP. WLTP is a recently introduced test that is used to measure fuel consumption, pollutants and CO2 emissions, and replaces the New European Driving Cycle (NEDC) an outdated method of calculating emissions levels of passenger cars.

The switch from NEDC to WLTP will happen on 6th April 2020.

As a result, HM Treasury will be introducing two new rates for zero emission company car drivers – those driving a company car registered after 6th April 2020, and those driving a company car first registered before 6th April 2020. From 2020/21, low emission company cars (those with CO2 emissions of 75 or less) first registered on or after 6th April 2020 will have a lower BIK charge than low emission cars first registered before 6th April 2020.

The move to provide a one-year tax break on electric company vehicles is part of the government’s wider ‘Road to Zero’ initiative, a long-term strategy that has been devised to reduce and eventually cut all road transport emissions by 2040.

If you have any questions regarding benefit-in-kind taxes, or have any other employment related tax queries, please get in touch today. Our dedicated employment tax team is made up of highly experienced advisers who add value to your business, providing cost effective and pragmatic solutions that ensure you remain compliant and adhere to HMRC requirements.

To read the most recent advisory fuel rates for all other types of cars, published by HMRC in May 2019 for June 2019 onwards, please click here.