To encourage companies to use electric cars the method of calculating the taxable benefit of company cars is changing for those with zero or low CO2 emissions.
In 2020-21 pure electric cars will attract no taxable benefit for employees, down from the current rate of 16% of the list price. However this free use of a company-owned electric car will not last. The employee will be taxed on 1% of the list price in 2021-22 and 2% in 2022-23.
Hybrid cars with an electric-only range of 130 miles or more will also attract no taxable benefit for 2020-21 if the car is first registered on or after 6 April 2020. Hybrid cars registered before that date with an electric only range of 130 miles or more will attract a taxable benefit of 2% of the list price.
This difference between older cars and new cars registered from 6 April 2020 is due to a change in the way the CO2 emissions are recorded.
From 2020-21 employers will need to know whether each company car was first registered before or after 6 April 2020 and for hybrid vehicles the range it can be driven on purely electric power before recharging.
The benefit of driving an electric commercial vehicle for private journeys is currently taxed at 80% of that for a petrol or diesel commercial vehicle, so £2,792 for 2020-21. This will be changed from April 2021 so there will be no taxable benefit for driving a commercial vehicle with zero CO2 emissions. If there is no private use of the commercial vehicle there is no taxable benefit regardless of how the vehicle is powered.
This article is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.