THERE is nothing illegal about this approach; no tax-dodging plan by clever accountancy firms: but you can drive a company car and pay no company car tax.
And it is all courtesy of HMRC.
Fully electric vehicles will incur a 0% tax rate for the 2020/21 tax year; and over the following two tax years pay just 1% and then 2% company car tax.
How’s that for an incentive for fleet drivers to choose an electric vehicle as their next company car?
It means that cars, such as the new electric MINI announced yesterday, can be run for zero benefit in kind tax.
The changes have come about thanks to new company car tax regulations. These provide clarity for small fleet company car drivers over the next three years: 2020 to 2023.
There is a degree of complexity that takes into account the new WLTP measurement of fuel efficiency – which tends to be higher for than for cars registered under the old NEDC method. The government says that this is the best way to manage the transition to WLTP while encouraging drivers into ultra low emission vehicles.
So there are a set of tax tables for cars registered after April 06, 2020; and a set of tax tables for cars registered before April 06, 2020.
For cars first registered from April 06, 2020 – which will be measured under WLTP – most company car tax rates will be reduced by two percentage points in 2020-21 before returning to planned rates over the following two years in 1% increments.
For cars registered before April 06, 2020, company car tax rates are frozen.
Except for zero emission cars. So drivers that have already chosen an electric car will benefit by a 2% drop in company car tax from the planned rate for 2020/21 (originally 2%).
Here’s How To Drive A Car And Pay No Company Car Tax
Say you choose that new MINI electric Hatch (pictured above). This has a list price of £27,900 for company car tax purposes.
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Tax year 2020/21 = 0% tax – Company car tax payable @ 20% rate = £0pa
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Tax year 2021/22 = 1% tax – Company car tax payable @ 20% rate = £56pa
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Tax year 2022/23 = 2% tax – Company car tax payable @ 20% rate = £112pa
Volkswagen e-Golf in your company car park – at no cost in benefit-in-kind tax
If you decide to jump in early, and that the electric car route is for you, how would that work? Let’s take the example of a Volkswagen e-Golf for vehicles registered pre-April 06, 2020. Result: you still pay 0% company car tax.
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Tax year 2020/21 = 0% tax – Company car tax payable @ 20% rate = £0pa
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Tax year 2021/22 = 1% tax – Company car tax payable @ 20% rate = £68pa
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Tax year 2022/23 = 2% tax – Company car tax payable @ 20% rate = £136pa
OK, the ability to not pay company car tax is only available for a year. But why not take advantage of it? And such are the benefits, that the following year you’ll pay from less than £5 a month (MINI) and from less than £6 a month in tax for the Golf. Which is pretty close to nothing.
What Are The Implications For Small Fleets And Company Cars?
The announcement of the new company car tax tables – and the fact that you can drive an electric car for zero tax – provides welcome foresight. It allows fleets to start planning. And electric cars look to be central to those plans.
Simon Carr
“The government has provided some clarity on company car taxation”
Simon Carr, the Chief Commercial Officer at fleet leasing and mobility experts Alphabet says that “it is a welcome reduction in the tax burden for most company car drivers”.
Before adding:
“The announcement of 0% BIK tax rates for pure battery electric vehicles from April 2020 – followed by 1% in April 2021 and 2% in April 2022 – could see a renaissance for the company car and give us real momentum on the road to zero.”
Meanwhile, the BVRLA’s Director of Policy and Membership, Jay Parmar, comments that:
“This is a good day for company car drivers.
“The Treasury is giving back some of the unfair Company Car Tax windfall it was set to receive as a result of WLTP and providing some essential extra visibility on future tax costs for those looking to order their next vehicle.”
But the key thing is this: start thinking how electric vehicles can work for your fleet. After all, who wants to pay company car tax anyway?
Company Car Tax Tables For Cars Registered From 06 April 2020
Company Car Tax Tables For Cars Registered Before 06 April 2020
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