The UK government has announced that all zero emission company cars will not be required to pay benefit-in-kind (BIK) tax for 2020/21.
HM Treasury published its decision following its review of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions regulations last year. “The introduction of WLTP provides an opportunity to strengthen the link between the vehicle tax system and the true environmental impact of car purchasing decisions, allowing consumers to make more informed decisions between model variations,” read the review.
The new rules state that most appropriate percentages will be reduced by two percentage points in 2020/21 before returning to planned rates over the following two years. This applies to company cars first registered from 6 April 2020.
All zero emission company cars will pay zero BIK tax in 2020/21, 1% in 2021/22, before returning to the planned 2% rate in 2022/23. The tax reductions will also be extended to vehicles registered prior to 6 April.
A statement from the government read: “The vehicle tax system plays an important role in supporting our ambition for all new cars sold to be effectively zero emission by 2040 and to help achieve our legally binding climate change objectives.
“However, the government recognises that WLTP represents a significant change to the vehicle tax system and is aiming to support the automotive sector – and protect consumers – during the transition.”
Jay Palmer, director of policy and membership at the BVRLA, said the announcement represents a positive for the market: “Recognising the value of the company car market in supporting the transition to zero emission technology is also a positive endorsement for our sector, showing refreshing alignment between government’s environmental and fiscal policies.”
“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.”
The announcement follows a commitment from the government to invest £37m in EV charging infrastructure.
“We’re charging up the transport revolution and investing in technologies to transform the experience for electric vehicle drivers,” said Michael Ellis, future of mobility minister. “Ensuring the charging infrastructure for electric vehicles is reliable and innovative is encouraging more people to join the record numbers of ultra-low emission vehicle users already on UK roads.