Electric car drivers won’t have to pay company car tax from next year

Electric car drivers won’t have to pay company car tax from next year


Electric cars owners will not have to pay any Benefit-in-Kind (BiK) tax during the next financial year. BiK is otherwise known as company car tax and can be expensive for motorists that are required to fork out for it. However, after the Treasury reviewed its tax rules electric car drivers will be no longer required to pay it. It follows the introduction of the WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions regulations.

WLTP replaced the NEDC regime and offers a more accurate representation of fuel economy and emissions in the real world.

As a result if these new emissions tests BiK rates increased for a lot of motorists which could potentially cost drivers more as they are based on CO2 emissions.

To offset this the Treasury has revised BiK rates for the 2020/21 financial year with most percentage bands reduced by two points.

Electric cars will not pay any Benefit-in-Kind rate over the cost of the financial year and applies to cars registered from 6 April 2020, and those registered before that date.

Hybrid cars which can travel 130-miles of electric range and CO2 emissions of between 1-50g/km or below will also be exempt.

However, these tax breaks for electric can hybrid cars are set to change over the next comes of year.

The rate for EVs and PHEVs produce plus-150-mile on a charge will pat one per cent in 2021/22 and two per cent in 2022/23.

Matthew Walters, head of consultancy and customer data services at LeasePlan UK, said: “This is a milestone moment for the industry, as it is the first time company cars will pay no tax at all, following the announcement that zero emission vehicles, along with hybrids that have an all electric range of 130 miles, will have their taxes scrapped.

“We also welcome the clarity that this announcement has brought to the tax years of 2021/22 and 2022/33, as well as the notable reduced rate at which the increase will occur, by 1% per annum.

“Whilst the Government is taking action, we are expecting higher CO2 figures on traditional fuels as we move to WLTP – it’s therefore essential that businesses work with their fleet providers to understand not just the costs involved, but the future fleet make-up and strategy – which will undoubtedly mean exploring the potential for low emission vehicles.”

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