Tax cuts coming for zero emissions vehicles

Newsletter issue - September 2019.

Significant changes to the tax rules governing zero emissions company cars will take effect from 6 April 2020, potentially making an electric car a more attractive option.

The tax rules for calculating the taxable benefit arising on a car are not changing - this will still be calculated (broadly) using the car's full manufacturer's published UK list price multiplied by the 'appropriate percentage', which can be found by reference to the car's CO2 emissions level. This calculation gives the taxable value of the car benefit. The employee pays income tax on the final figure at his appropriate tax rate (e.g. 20% for basic rate taxpayers; 40% for higher rate taxpayers). This formula means that in general terms, the lower the C02 emissions of the car, the lower the resulting tax charge will be.

For 2019-20, the appropriate percentage for cars (whether fully electric or not) is 16% for those emitting 50g/km CO2 or below, and 19% for those emitting CO2 of between 51 and 75g/km. This means that the taxable benefit arising on a zero emissions car costing, say £30,000 is £4,800, with tax payable of £960 for a basic rate taxpayer.

From April 2020, new ULEV rates will take effect, making cars with CO2 emissions below 50g/km the most tax-efficient for company car drivers. In summary, five new bandings are being introduced for full and/or part electric cars (hybrids). Fully electric (zero emissions) cars will attract an appropriate percentage of just 2%. This means that the tax benefit arising on an electric car costing say, £30,000 will be just £600. The resulting tax payable by a basic rate taxpayer will be £120 a year.

For cars emitting CO2 of between 1 and 50g/km, the appropriate percentage will depend on the car's electric range figure:

130 miles or more - 2%

70 - 129 miles - 5%

40-69 miles - 8%

30-39 miles - 12%

Less than 30 miles -14%

ULEVs with CO2 emissions of between 50g-74g/km CO2 will be on a graduated scale from 15% to 19% (as is currently the case, diesel-only vehicles will continue to attract a further 4% surcharge) as follows:

CO2 emissions

51 to 54g/km 15%
55 to 59g/km 16%
60 to 64g/km 17%
65 to 69g/km 18%
70 to 74g/km 19%
75 or more 20%
Plus 1% per 5g/km
Up to a maximum 37%

Clean air all-electric cars will plummet to 2% under the new company car tax incentives from April 2020 - the incentives in the new tax bands are clearly designed to encourage ULEVs as a company car driver's car of choice.

Get a fixed quote

Fixed prices for agreed services

FAIR FEE POLICY. We believe you should always be in control of your fees with no surprises. You are entitled to a competitive fixed quote for agreed services, which is exactly what we charge, not a penny more. Most clients choose this option although if you prefer to pay an hourly rate we can arrange that too.

To receive a fixed quote for your specific circumstances either arrange a Free No Obligation Consultation or submit the form below. The form is designed for most of the routine accountancy services. If you require something more specialist, please contact us directly. If necessary we will contact you for further information.

If you are a new start up business, please use estimates. Full quotes are provided within 2 working days.

FIXED QUOTE REQUEST FORM »

Make more, keep more, work less

Get the right advice and take action

MAKE MORE

Have clear goals including long, medium and short term for what you want to achieve and develop a roadmap to get you there... read more »


KEEP MORE

Use our Tax Planning Service to ensure you don’t pay a penny more in tax than is necessary... read more »


WORK LESS

Work ON your business and not IN your business - work ON your systems so the systems run the business and your people run the systems, leaving you free to have more holidays... read more »

Start Up

Are you looking to start a new business?

Choose your business size to see how we can help you

Small

Key points for our small business clients to know

Choose your business size to see how we can help you

Medium

Help and assistance for medium sized businesses

Choose your business size to see how we can help you

Large

See our extensive range of services for your needs

Choose your business size to see how we can help you