Putting Tax on the Table
With the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), emissions testing and company car tax are changing. Plan for your fleet’s future with BCF Wessex – offering a closer look at what’s coming next year.
The current CO₂ emissions-based taxation of company cars is based on figures derived from the New European Driving Cycle (NEDC).
But, since September 2017, the industry has been waiting for the government to confirm exactly how fleets should be taxed under the new WLTP regime.
The tables below are this confirmation, showing how Benefit-in-Kind (BIK) tax is going to be applied from April. The first is for cars registered from 6th April 2020. The second is for cars registered before 6th April 2020, which will continue to be taxed according to their NEDC emissions.
Cars registered from 6th April 2020 *
CO₂ emissions Zero emission range 2020/21 2021/22 2022/23 g/km Miles % % % 0 0 1 2 1 – 50 130 and above 0 1 2 70 – 129 3 4 5 40 – 69 6 7 8 30 – 39 10 11 12 Under 30 12 13 14 51 – 54 13 14 15 55 – 59 14 15 16 Each additional 5g/km +1% +1% +1% 160 – 164 35 36 37 165 – 169 36 37 37 170 and above 37 37 37
* From 6 April 2018 all cars propelled solely by diesel are subject to a 4% supplement unless they meet the Real Driving Emissions Step 2 (RDE2) standard. However, the maximum appropriate percentage cannot exceed 37%.
Cars registered before 6th April 2020 **
CO₂ emissions Zero emission range 2020/21 2021/22 2022/23 g/km Miles % % % 0 0 1 2 1 – 50 130 and above 2 2 2 70 – 129 5 5 5 40 – 69 8 8 8 30 – 39 12 12 12 Under 30 14 14 14 51 – 54 15 15 15 55 – 59 16 16 16 Each additional 5g/km +1% +1% +1% 150 – 154 35 35 35 155 – 159 36 36 36 160 and above 37 37 37
** From 6 April 2018 all cars propelled solely by diesel are subject to a 4% supplement unless they meet the Real Driving Emissions Step 2 (RDE2) standard. However, the maximum appropriate percentage cannot exceed 37%.
Due to the more rigorous tests applied under WLTP, it’s generally assumed that emissions will be higher. So, to help support its introduction, there will be reduced tax rates for cars newly registered from 6th April 2020.
As one of the first car manufacturers to make its entire range compliant with WLTP standards, Volvo Cars has long been ahead of the curve. And, now these tables are published, it’s clear that a comprehensive electrification strategy has put it in a position to benefit.
As part of the government’s Road to Zero strategy, ultra-low emission cars (ULEVs) will benefit from the lowest rates of company car tax under both regimes.
As you can see in the tables, this will be calculated according to both their emissions and zero emission range (ZER), which is the number of miles a ULEV can travel on one full battery charge.
This is good news for Volvo Cars’ growing number of ULEVs. For example, the new XC40 T5 Twin Engine R Design falls within one of the lowest tax brackets and offers company car drivers a BIK tax reduction in 2020.
What’s more, the XC40 T5 Twin Engine R Design will be an ideal choice for drivers wishing to benefit from salary sacrifice.
With emissions of less than 76g/km, it’s exempt from the optional remuneration arrangement (OpRA) rules, meaning drivers can still benefit from the full income tax and National Insurance (NI) relief available on the salary sacrifice, as shown in the 2020/21 calculation below:
Volvo XC40 T5 Twin Engine R-Design
Volvo XC40 T5 Twin Engine R-Design
£42,250 list price
41g/km CO₂ emissions
27 miles ZER
Monthly rental £548 Monthly maintenance £75 Monthly insurance £60 Monthly salary sacrificed £683 Income tax saved (UK higher rate taxpayer) (£273) NI saved (£14) BIK tax on company car ( (£42,250 ✕ 14% ✕ 40%) / 12 ) £197 Monthly net cost to driver £593
The driver is able to save £90 per month and — what’s more — their employer would benefit from NI savings equating to £26 per month, offering a cost-saving opportunity to the fleet manager too.
Making tax straightforward
Government legislation and taxation are constantly changing. And in such a fast-paced industry, it can be hard to keep up. So we created our online tool, the Fleet Tax Guide.
It’s the simplest way to stay up to date with the latest news, regulations and tax changes as and when they happen – all in one convenient place.
Published 15 October 2019