In recent budget announcements the government had said that the way in which employee benefit in kind (BIK) charges for the personal use of cars was calculated would be updated from 6 April 2020. These changes meant that the rate of taxable benefit for cleaner cars would fall.
In July the government published a response to a consultation they launched in April following the introduction of the Worldwide harmonised Light vehicles Test Procedure (WLTP), and this contained details of further changes the government intends to make.
The consultation document and the response can be seen here. The WLTP was all about how the standards for testing levels of vehicle emissions are measured, and therefore has a knock-on effect for taxation which is often based on a vehicle's carbon dioxide emissions.
The original proposals would have seen a minimum taxable benefit of 2% of a cars value (calculated from the manufacturer's list price) for the lowest emission cars, even fully electric ones, although this would be a saving for the fully electric ones which will be charged at 16% up to 5 April 2020.
What the government have decided now is that the rates originally planned for 6 April 2020 onwards will be reduced by 2% points, and will be brought back to the originally proposed levels from 6 April 2022. These modified rates will apply to vehicles registered from 6 April 2020. Cars that are registered from this date onwards will have their official CO2 emissions figures recorded under the WLTP rules, which are generally higher than the existing measurements used today.
For cars registered before that date those which have zero carbon dioxide emissions will also benefit from the 2% reduction. This means that for the tax year ended 5 April 2021 all fully electric cars will have a 0% taxable benefit, increasing to 1% for 2022 and 2% in 2023.
Hybrid vehicles registered before 6 April 2020 (under the current emissions measuring system) will be subject to tax according to the rates already announced.
This means that the table of percentages that apply to the car's value for tax will be getting complicated. Below are two tables showing the rates applicable to electric or petrol hybrid cars depending on the registration date. For diesel vehicles the relevant percentages need to be increased by 4%, although this increase will never take the percentage beyond the maximum benefit rate of 37%.
Cars registered before April 2020
Cars registered from 6 April 2020