2020/21 company car tax for electric vehicles

Drivers of electric company cars will not be subject to BIK tax from April 2020

Changes in emissions regulations has resulted in the removal of BIK (benefit-in-kind) tax on employees who drive EVs (electric vehicles) as a company car.

The change in tax rules will come into play for the new financial year in April 2020 and will be applied to company cars registered both from and before the 6th April.

Currently BIK tax, or company car tax as it is also known, is payable on all company cars but the rate depends on the vehicles emissions.

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With the NEDC (New European Driving Cycle) being replaced by the WLTP (Worldwide harmonised light vehicle test procedure), new emissions regulations will rule the roost on company car tax from next year.

With the stricter rules brought about by the WLTP the government will lower BIK tax rates on company cars to offset the significant hike in tax payable as a result of higher recorded vehicle emissions.

Most BIK tax bandings will be reduced by two percentage points and with EVs set to receive a 2% company car tax rate before the changes were announced, they will now face a 0% rate for the new financial year.

Plug-in hybrid vehicles which can reach a 130-mile electric range, and which fall in the 1-50g/km emissions band will also be exempt from paying any BIK tax in 2020/21.

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The move by the government to remove company car tax from electric vehicles recognises the value the company car market has in supporting a general shift away from higher emission vehicles towards zero emission technology.

It is also believed that the new tax rules, combined with the increasing popularity of EVs, could see a swing back towards company cars following a recent shift towards more employees opting for cash alternatives.