Last week the government published the draft legislation which outlines the company car benefit in kind appropriate percentages for the coming years – announcing that company car drivers with zero emission vehicles will pay no benefit-in-kind (BIK) tax in 2020/21.
Importantly there are three full years of BIK rates providing clarity for employees and fleet decision makers as well as the government recognising the role the company car market has to play in the transition to zero emission technology.
In the announcement the government has amended its previously published BIK rates for 2020/21 and produced two new tables for company car drivers;
- Cars registered before April 6, 2020 on the current NEDC or NEDC correlated CO2
- Zero emission EVs reduced to 0% in 2020/21 and increasing by 1% each year until 2022/23
- Vehicles with a CO2 greater than 0 g/km, see the 2020/21 rate previously provided remain and then frozen until 2022/23
- Cars registered after April 6, 2020
- All vehicles see a 2% reduction to the appropriate percentage previously published for 2020/21
- Vehicles then see an annual increase of 1% until 2022/23
This creates parity in the two tables in 2022/23 and the return to one tax table again.
The 4% diesel surcharge remains, unless cars meet the Real Driving Emissions 2 (RDE2) standard which makes them exempt. RDE2 compliance is mandatory for all vehicles on sale from January 2021, all new models introduced from January 2020 and already available on derivatives of some key fleet vehicles – the new Mercedes A-Class, new BMW 1 Series and Jaguar XE and XF.
So what does this mean for employee BIK, below are some example vehicles:
The electric vehicle
AUDI E-TRON ESTATE 300kW 55 Quattro 95kWh 5dr Auto
CO2 – 0 g/km (Same for NEDC/WLPT)
P11d – £71505
| Appropriate percentage – registered pre 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax payer) | Appropriate percentage – registered post 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax Payer) | |
| 2020/21 | 0 | £0 (£0) | 0 | £0 |
| 2021/22 | 1 | £715 (£24) | 1 | £715 (£24) |
| 2022/23 | 2 | £1,430 (£48) | 1 | £1,430 (£48) |
A no brainer
where adoption of pure EV is suitable and the company is willing to pay for the
vehicle. On the whole companies should expect more demand from employees for EV
and ULEVs.
The RDE2 standard family
hatchback
MERCEDES-BENZ A CLASS DIESEL HATCHBACK A200d Sport 5dr Auto
NEDC CO2 – 110 g/km – RDE2
WLTP CO2 – 125 g/km – RDE2
P11d – £28,685
| Appropriate percentage – registered pre 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax payer) | Appropriate percentage – registered post 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax Payer) | |
| 2020/21 | 27 | £7,745 (£129) | 28 | £8,082 (£135) |
| 2021/22 | 27 | £7,745 (£129) | 29 | £8,319 (£139) |
| 2022/23 | 27 | £7,745 (£129) | 30 | £8,606 (£143) |
For basic rate
tax payers – which from April 2019 is employees earning up to £50,000 – there
is no significant jump in BIK depending on when you renew or year on year and
the value of the company car as a benefit remains obvious to see. RDE2
compliance and avoiding the diesel surcharge certainly helps.
Old faithful
BMW 3 SERIES DIESEL SALOON 320d M Sport 4dr Step Auto
NEDC CO2 – 113 g/km – non-RDE2
WLTP CO2 – 140 g/km – non-RDE2
P11d – £38,050
| Appropriate percentage – registered pre 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax payer) | Appropriate percentage – registered post 6 April 2020 | Value of Benefit (Monthly BIK 40% Tax Payer) | |
| 2020/21 | 31 | £11,796 (£393) | 35 | £13,318 (£444) |
| 2021/22 | 31 | £11,796 (£393) | 36 | £13,968 (£456) |
| 2022/23 | 31 | £11,796 (£393) | 37 | £14,079 (£469) |
Unfortunately
without RDE2 compliance and the increase in CO2 – as a result of WLTP – for
high earning traditional company car drivers it is an effective increase of £61
per month over three years on cars registered after April 2020. If EVs oh PHEVs
are not suitable for these employees you can consider an alternative structure
such as maximising cash allowances, approved mileage allowance payments (AMAPs)
or mileage allowance relief (MAR).
The ‘one size fits all’ approach to fleet is a thing of the past and the draft
legislation only confirms this. Speak to your JCT600 VLS Account Manager to
discuss the suitability of zero emission vehicles on your fleet and how you can
structure your policy and choice lists to take advantage of the changes for
your company and your employees.
Here are some handy links
to help you further:
- For easy to read BIK tables visit: http://www.cartaxguide.co.uk/JCT600/#!/CompanyCarFuelBenefits
- For a review of WLTP and Vehicle Taxes visit: http://www.cartaxguide.co.uk/JCT600/#!/LatestAnnouncements
- To read the government’s draft legislation visit: https://www.gov.uk/government/publications/taxable-benefits-and-rules-for-measuring-carbon-dioxide-emissions
In the meantime if
you have any questions, please don’t hesitate to get in touch with us and we
will be happy to assist.