From 6 April 2020 the calculation of company car taxable benefits will be changed to favour electric and hybrid vehicles.
This is good news for some company car drivers. However, due to a switch in the methods used for measuring vehicles’ CO2 emissions, there will be two different tables to work out the taxable benefit of a company car.
Cars first registered on or after 6 April 2020 will have lower taxable benefits at every level of emissions than cars registered before that date. However, the ‘new car’ tables will be adjusted to catch up with the ‘old car’ benefits by 2023. These parallel benefit tables could cause some confusion and disagreement among employees who drive similar company cars but that were registered on different dates.
Example
Tim drives a Toyota Prius plug-in which has a list price of £31,000 and emissions of 28g/km. In 2019-20 the benefit of driving this hybrid electric/petrol car is calculated as 16% of its list price: £4,960. In 2020-21, as it has a zero-emissions range of 39 miles, the taxable benefit drops to 12% of the list price: £3,720.
Tim’s colleague Jim opts to take an identical Toyota Prius as his company car which also has a list price of £31,000. Jim’s Toyota is registered on 6 April 2020 so the taxable benefit in 2020-21 is 10%. Jim pays tax on £3,100 on the benefit of driving his new Toyota, but Tim pays tax on £3,720 for the benefit of driving his slightly older car.
In 2021-22 Jim is taxed on 11% of his car’s list price: £3,410 while Tim is still paying tax on £3,720. In 2022-23 Jim’s taxable benefit rises to 12% of the list price so Tim and Jim are taxed on the same amount in respect of their identical company cars.
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.
