How do the new company car tax bands favour ultra-low emission vehicles (ULEVs)?

Starting from tax year 2020/21, changes will be made to company car tax benefit-in-kind bands. These were first put forward in 2016 and finally confirmed in autumn 2017. The changes affect ultra-low emission vehicles, which are cars with CO2 emissions below 75g/km.

What does this mean in practice?

Until 2020 the benefit-in-kind rate for company car tax does increase for sub-75g/km ULEVs with even zero-emission cars rising to 16% tax banding in 2019/20.

However, in 2020 all electric vehicles will drop to a 2% rate under the new company car tax incentives.

In 2020/21 when the new ULEV rates kick in, the most tax efficient cars will be those with CO2 emissions below 50g/km. In addition, there are further incentives for those cars that can travel furthest on electric only.

That is when their electric motoring range will band 1-50g/km hybrids with less than 30 miles attracting a 14% rating; while those, which can achieve 70-129 miles electric-only, will attract a 5% rating.

ULEVs with CO2 emissions between 50g-74g/km CO2 are on a graduated scale from 15% to 19%.

Diesel-only vehicles will to attract a further 4% surcharge from the 2018/19 tax year onwards while diesel hybrids are exempt.

The company car tax changes might appear complicated, but the only certain way to contain benefit in kind exposure is by choosing a ULEV vehicle.

In association with Croner Taxwise

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