Written by Paul Chappell
Published on November 1, 2019
Changes company car benefits rates from 2020/2021

On 4 October 2019, HMRC issued a snappily entitled document, ‘Ultra Low Emission Vehicles (ULEV) and Worldwide Harmonised Light Vehicle Test Procedure (WLTP).ht

The ULEV and WLTP will have an effect on the calculation of car benefits and will lead, ultimately, to increased tax payable.

The changes will come into effect from 6 April 2020. Legislation is providing for a second table of company car rates for cars registered from 6 April 2020. The table will work as the current table does but have different percentages form those cars registered before 6 April 2020.

As HMRC do not want to distort new car sales, the post 6 April rates are reduced by 2%. In subsequent the reduction will be phased out so that by 2022/2023 all cars are tax on the same basis.

HMRC have also announced that a company car zero emission will attract no tax charge in 2020/2021. The rates will increase in subsequent years, 1% in 2021/2022 and 2% in 2022/2023 as already announced.

Dataplan Opinion

It is inevitable that WLTP will lead to increased car benefit as the test is designed to match general driving rather than emissions from a laboratory test. The reductions are in place for 2 years, if companies are planning to change company cars in the next couple of years, it is worth doing the sums and bringing forward the purchase.

The same can be said for zero emission cars. A tax charge will be made, albeit at a low level, but for 2020/21 there will be no charge. This is a significant saving from the 16 % charge for 2019/2020 tax year. The Government’s aim is to encourage the purchase of a zero emission car, 2020/2021 tax year is the year to do so.

For more details contact Paul Chappell Head of Legislation and Compliance at Dataplan Payroll Ltd on 03331 123456