Company car tax rates for ULEVs 2020-21 revealed

Plug-in-vehicle-2

The future structure for company car tax bands have been published by HMRC for the tax year 2020 to 2021, with a focus on promoting the use of ultra low emission vehicles (ULEVs). The plans have been announced in draft legislation that is now open for consultation, with rates to be confirmed in the Budget 2017.

The new system would see a number of new tax bands introduced to differentiate between ULEVs according the electric-only range, while a number of redundant high emission bands have been cleaned up into one rating.

Whereas currently there is one BIK band for vehicles with CO2 emissions of 0-50 g/km, come 2020. there would in the future be six. Electric vehicles with zero tailpipe emissions are likely to have a have a BIK rate of 2%, while models with 1-50 g/km CO2 – such as PHEVs – would vary from 2%-14%.

The reason for the change is that HMRC is aiming to offer greater benefits to those that choose vehicles with longer electric ranges, and are therefore more likely to be in zero-emission mode more often.

Electric cars emitting 1-50 g/km CO2 and able to travel 130 miles or more would also have a BIK rate of 2%, while models that cover less than 30 miles on electric power would have a BIK rate of 14%.

Reflecting the increase of lower emission cars, new CO2 bands are proposed, with each subsequent band seeing smaller increments. Currently, three bands cover vehicles with emissions from 51-99 g/km CO2; in the plans there would be 10.

To make sure there isn’t a huge number of bands though, models that emit 160 g/km CO2 or more all have the same maximum BIK rate of 37%, which tidies up a number of bands that will all have the same rating in the next few years.

There is no mention of a diesel surcharge in the draft legislation, looking as though the extra 3% charged for diesel models over petrol (up until the limit of 37%) will be scrapped (again).

The table below shows CO2 bands and BIK rates from the HMRC Finance Bill 2017 draft legislation document.

CO2 (g/km) Electric range (miles) BIK 2020 to 2021
0 2%
1-50 >130 2%
1-50 70 – 129 5%
1-50 40 – 69 8%
1-50 30-39 12%
1-50 <30 14%
51 – 54 15%
55 – 59 16%
60 – 64 17%
65 – 69 18%
70 – 74 19%
75 – 79 20%
80 – 84 21%
85 – 89 22%
90 – 94 23%
95 – 99 24%
100 – 104 25%
105 – 109 26%
110 – 114 27%
115 – 119 28%
120 – 124 29%
125 – 129 30%
130 – 134 31%
135 – 139 32%
140 – 144 33%
145 – 149 34%
150 – 154 35%
155 – 159 36%
160 and above 37%

Table courtesy of HMRC. Electric range in miles is the number of kilometres declared on the certificate of conformity or type approval, multiplied by 0.62.

EVs, connectivity and infrastructure feature in Autumn Statement 2016

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In the UK’s Autumn Statement, Chancellor of the Exchequer Phillip Hammond MP announced a further £390 million investment by 2020-21 in ultra-low emission vehicles (ULEVs) and connected and autonomous vehicles (CAVs).

As part of the statement, Mr Hammond revealed that £80 million will be provided for charging points for ULEVs, while £100 million will be invested in testing infrastructure for driverless cars.

Related investments include £150 million in support for low emission buses and taxis, and £20 million for the development of alternative aviation and heavy goods vehicle fuels.

In addition to supporting the advanced and expanding ULEV industry in the UK, a wider range of transport-based investments were also announced including a new Cambridge-Oxford Expressway which will not only ease congestion along a route that also takes in Milton Keynes, but also reinforce the regions research and technology corridor, of which the automotive industry plays a significant part.

The tech corridor is part of a new £1.1 billion investment in the UK road network, aimed at reducing congestion at traffic pinch points and their environmental impact.

The UK Government will also provide £23 billion for a National Productivity Investment Fund over the next five years, which will be of benefit to the UK’s automotive manufacturing and research & development industries. Likewise, the automotive industry will benefit from the £1 billion investment in full-fibre broadband and 5G mobile communications, with the latter considered an important element in the roll-out of connected and autonomous cars.

Regarding changes to transport taxation, from today to the end of March 2019, business installed EV charging points will now be eligible for Enhanced Capital Allowances (100% First Year write-down), and ULEVs are excluded from clamp-downs on existing Salary Sacrifice schemes, with sub-75 g/km CO2 vehicles set to be available under such schemes.

Changes to Company Car Tax bands were also announced from 2020-21, with new lower bands set to be introduced for the lowest emitting cars, while vehicles emitting more than 90 g/km CO2 will see their BIK percentage rise one per cent. Details to expected to follow by the next Budget in March 2017.

As expected, fuel duty for petrol and diesel will be frozen at 57.95 pence per litre until April 2017, the seventh successive year that it remains unchanged saving the average car driver £130 a year, and the average van driver £350 a year.