An overview of upcoming changes to vehicle taxation
To meet climate change targets the government needs to increase the number of electric vehicles (EVs) on the road.
To meet these targets changes have been made to vehicle taxation, including providing a range of incentives. These incentives include the introduction of new Benefit in Kind (BIK) bands for EVs and enhanced capital allowances for ultra-low emission cars and fully electric vehicles.
These changes will mean that for the 2021/2022 tax year drivers of fully electric cars provided by their employer will pay income tax on a benefit, that is calculated at just 1% of the vehicles “original market value”.
There are a further five company car tax bands for plug-in hybrid cars which emit 1-50g of CO2/km which will further benefit those EVs that can drive furthest with zero emissions.
Car Fuel Benefits
| Taxable benefit: List price multiplied by chargeable percentage | 2021/22 percentage for petrol cars first registered |
| CO2 emissions | Electric Range | Pre 06.04.2020 | Post 05.04.2020 |
| g/km | Miles | % | % |
| 0 | N/A | 1 | 1 |
| 1-50 | >130 | 2 | 1 |
| 1-50 | 70-129 | 5 | 4 |
| 1-50 | 40-69 | 8 | 7 |
| 1-50 | 30-39 | 12 | 11 |
| 1-50 | <30 | 14 | 13 |
| 51-54 | N/A | 15 | 14 |
Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.
Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.
Car Fuel
Where an employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from the above table should be multiplied by £24,600.
Capital Allowances
CO2 emission thresholds for certain capital allowance change from April 2021:
- 100% first-year allowances will be available only for new zero emission cars (previously this was available for cars with CO2 emissions not exceeding 50g/km).
- Expenditure on cars with an emissions figure exceeding 50 g/km (previously 110 g/km) will qualify for capital allowances only in the special rate pool (on which writing down allowances at 6% per annum can be claimed), rather than the main pool (on which writing down allowances at 18% per annum can be claimed).
If you would like any advice on how these changes will affect you, please get in touch with our team.