Electric car tax update

Good news for drivers of company owned electric cars

In the Autumn 2017 Budget the government announced that from April 2020 all newly registered cars will have their emission levels for company car tax purposes determined under a new standard known as WLTP (Worldwide Light vehicles Test Procedure). This replaces the previous test known as the New European Driving Cycle (NEDC), which was designed in the 1980s and has become increasingly outdated. So what does that mean for the average company car driver?

Emissions testing

The WLTP test is widely considered to be a more stringent emissions test, carried out under real driving conditions, and is expected to return higher emissions values when compared to the old test results under NEDC rules. Given that company car tax is calculated based on emissions data, this clearly will have an impact on the amount of company car tax payable.  Unless something were to give, company car tax rates would rise for newly registered vehicles after April 2020 despite the fact that the car may be exactly the same as a pre-April 2020 model assessed under the old rules.

Thankfully the government have seen sense on this issue and earlier this month published the results of their consultation paper on the introduction of the WLTP test and its interaction with Vehicle Excise Duty (VED) as well as company car tax.  The result is that to counter the likely increase in emissions figures under the new test, it will reduce company car tax rates by 2% across the board from April 2020 as an offset

Electric car tax changes

The real bonus however comes for all-electric car drivers who will see their rate of company car tax reduce down to 0% from April 2020, assuming their vehicles can travel 130 miles or more on a single charge. This will provide some respite to electric car drivers who have seen their company car tax rates slowly rise in recent years from 0% originally up to 16% in the current 19/20 tax year. For those drivers whose vehicles travel less than 130 miles on a single charge, there is a sliding scale of increasing percentages, right up to 14% for vehicles only capable of travelling 30 miles or less on battery power alone.

electric car emissions test
…and the bad news

As is always the case, the good news won’t extend to everybody. There will clearly be cases where the 2% discount will not be enough to compensate for the increased emissions readings between the old NEDC and the new WLTP tests. This may result in an increased level of company car tax for some. And as always, The Treasury do not like to give anything away for free for too long! The 2% discount will be quickly reduced by 1% over each of the following two tax years, meaning by 2022/2023 the discount will have disappeared altogether.

Please also see our tax facts on electric vehicles for more information. If you are thinking about changing your company car, or need advice on what the tax benefits of an all-electric or hybrid car might provide, please get in touch.

For more information

For more information, please contact either:
Scott Harrower or Linda Warner, or call us on:

01483 416232