All Electric Cars Pay Zero Company Car Tax in 2020

The government consulted on whether changes needed to be made to the way company cars are taxed, for both VED and Company Car Tax, back in December 2018. The consultation was brought about due to the move to the WLTP standard for testing vehicle emissions.

The WLTP is deemed more accurate when considering how polluting a vehicle is, as it simulates real driving in testing, and therefore a better figure to rely on when looking to reach the lowered national CO2 targets. The target is to reduce CO2 to a maximum of 20% of 1990 levels by 2050.

From all UK 'Transport' based CO2 emissions, around 90 percent are from 'Road' transport.

The consultation aimed for changes to make for first car registrations from April 2020 onwards. Vehicle emissions being reported using WLTP standards will inevitably be higher than previously. On average C02 values increased by between 20 and 25 percent compared to the previous NEDC standardised data, with skews up to 40 percent higher in smaller engines vehicles and as low as 7 percent higher in larger engined vehicles. Diesels are more affected than other fuels.

The initial impact on Tax would increase revenue for the Treasury by up to £600 million.

Moving forward past 2020, in order to not impact new vehicle registrations, the bands for current taxes would need adjustment to prevent negative impact. In addition, the majority of vehicles on sale by 2040 will be either fully electric or ULEV's and thus changes needed to account for this.

In response, the government has proposed the following:

EV and zero emission vehicles to be zero rated in 2020, but 1 percent tax in 2021 and 2 percent tax in 2022. This includes vehicles registered before April 2020.

Other existing VED rates and bands to remain the same as before WLTP, even past April 2020.

Some company car tax bands will be reduced by 2 percent for 2020, but return to 2 percent increases gradually over the following two years.

To calculate company car tax, multiply the P11d value of the car (list price + options) by the percentage from the table below and then multiply that value by your marginal tax rate (20,40 or 45 percent).

For example:

For a basic rate taxpayer with a 2020 registered vehicle value of £20,000 with emissions of 30 g/km and an electric range of 30 miles. The annual company car tax in 2020 would be, 20000 x 10% x 20%, which is, £400.

The new company car tax band tables for 2020 to 2028 is set out below:

Cars registered from April 6 2020

Cars registered before April 6 2020

Changes to VED structures will be revealed later in the year and will likely affect vehicles at the lower end of the CO2 emission scale.