The Government has announced that company car drivers that choose an electric vehicle will not be liable for paying Benefit-in-Kind tax in 2020/21.

The statement comes as the Treasury has published BIK rates until 2022/23 – and has axed those that were previously planned to come into force from next April, with two tables being created – one for cars registered before 6 April 2020 and another for those registered after 6 April 2020.

The Treasury says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points.

For electric vehicle owners, it means they will not pay tax next year with 2021/22’s rate set at 1% and 2022/23’s rate at 2% – the previously-announced rate for 2021/22.

The 4% diesel levy remains, however, as at present, RDE-2-compliant vehicles are exempt from the hike.

While these rates are now set in stone for the 2021/22 tax year, the new chancellor under the next prime minister will have the opportunity to alter future years’ rates if they wish to do so, Company Car Today understands.

“The Government recognises the value of the company car market in supporting the transition to zero emission technology. This is reflected in a higher proportion of company cars with zero emissions – compared to private registrations – and the high proportion of these that are subsequently supplied to the second-hand market after 3-4 years,” said the Treasury. “In response, an appropriate percentage of 0% will be introduced for all zero emission company cars in 2020-21 (including those registered before 6 April 2020). By providing clarity of future the appropriate percentages, businesses will have the ability to make more informed decisions about how they make the transition to zero emission fleets.”

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It added: “Appropriate percentages beyond 2022-23 remain under review and will be announced at future fiscal events. The Government aims to announce appropriate percentages at least two years ahead of implementation to provide certainty for employers, employees and fleet operators.”

Reacting to the announcement, BVRLA Director of Policy and Membership, Jay Parmar said: “The Government has responded positively to the Company Car Tax campaign mounted earlier this year by the BVRLA, its members and fleet industry colleagues. Our regular engagement with policymakers is clearly paying off as there now appears to be a greater appreciation for the importance of our industry in delivering Government’s wider economic and environmental ambitions.  Recognising the value of the company car market in supporting the transition to zero emission technology is also a positive endorsement for our sector, showing refreshing alignment between government’s environmental and fiscal policies.”

He added: “The Treasury is giving back some of the unfair Company Car Tax windfall it was set to receive as a result of WLTP and providing some essential extra visibility on future tax costs for those looking to order their next vehicle. This is a good day for company car drivers and our members.”

Simon Carr, chief commercial officer at Alphabet, said: “The announcement of 0% BIK tax rates for pure battery electric vehicles from April 2020 – followed by 1% in April 2021 and 2% in April 2022 – could see a renaissance for the company car and give us real momentum on the road to zero. Let’s also remember that plug-in hybrids are still a vital tool for the transition towards mass electrification for many organisations and although they will benefit from this 2% BIK reduction, we hope to see further practical and financial support for these vehicles in the Autumn Budget. It seems that Government has also listened to the voices of industry, business and consumers over recent years and provided some clarity on company car taxation up to April 2023. We look forward to further details being published on Thursday but on the face of it this is a hugely positive move for electric vehicles in the UK.”