Company Car Tax reduction on electric cars from 6 April 2020
From 6 April 2020 the tax due on the benefit in kind for both a pure electric car and for hybrids with a decent pure electric range will be at an historic low. The percentage used to calculate the company car tax on pure electric cars reduces from 16% to 0%. There are smaller but still significant tax reductions for hybrids. The tax rate for hybrids will depend on both the pure electric range and whether the car is registered before or after 6 April 2020. The tax rate for hybrids registered on or after 6 April 2020 will be 2% lower than that for those registered before 6 April 2020. Taken together, these changes show that there is a clear aim of Government to encourage the take up of “green” low emitting cars. The tables below show this. You can see that if you are thinking of buying a new electric car through the company to take advantage of the low BIK rates, it would be better to wait until you can buy one registered after 6 April 2020 if possible, to really maximise these great tax rates.
CCT rates from 6 April 2020 (cars registered post 6/4/2020)
CCT rates from 6 April 2020 (cars registered before 6/4/2020)
It is likely that many company car drivers will switch from diesel to hybrid, if not pure electric. In fact, the rates are so low that we expect more directors and employees to be offered an electric car as a benefit in kind because it will become much more tax efficient to do so.
Electric cars also benefit from a 100% first year allowance if bought by a business. To qualify the car’s C02 emissions must be 50g/km or less. Therefore, most hybrids will qualify as well as pure electric cars. However, the car must be “new or unused.” Rather surprisingly, this definition includes ex demonstrators, a fact that is often overlooked. This first year allowance of 100% is available for purchase made before 1 April 2021.
So, it really does pay to be “green”, at least as far as cars are concerned!
