HMRC rules from 6 April 2020 mean that company car drivers choosing a pure electric vehicle will pay no benefit-in-kind (BIK) tax in 2020/21.

In its long-awaited response to the review of WLTP and vehicle taxes, HMRC has removed the previously published BIK rates for 2020/21.

Standing in their place it has created two new BIK tables for company car drivers; a table for those driving a company car registered after April 6, 2020, and one for those driving a company car registered before April 6, 2020.

HMRC says that for cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points. This means for a pure electric vehicle with zero emissions, company car drivers will be taxed at 0%, paying no BIK tax at all.

Furthermore, the zero percentage rate is also extended to company car drivers in pure electric vehicles registered prior to April 6, 2020, who were already looking forward to a much reduced rate of 2% for 2020/21.

The 0% rate will also apply to company cars registered from April 6, 2020, with emissions from 1-50g/km and a pure electric mile range of 130 miles or more. Both will then increase to 1% in 2021/22 and 2% in 2022/23.

Pure electric company cars registered before April 6, 2020, will also increase to 1% and 2% in subsequent years, 2021/22 and 2022/23.

From 2023/24, fleets will have one BIK tax table again as the rates are realigned.

The Government says that “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”.

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.”

These changes can result in significant tax savings for company car drivers and it is advised to seek appropriate professional advice ahead of the forthcoming changes.

Cars first registered before 6 April 2020
CO2 (g/km)Electric range (miles)2020-21 (%)2021-22 (%)2022-23 (%)
0N/A012
1-50>130222
1-5070-129555
1-5040-69888
1-5030-39121212
1-50<30141414
51-54151515
55-59161616
60-64171717
65-69181818
70-74191919
75-79202020
80-84212121
85-89222222
90-94232323
95-99242424
100-104252525
105-109262626
110-114272727
115-119282828
120-124292929
125-129303030
130-134313131
135-139323232
140-144333333
145-149343434
150-154353535
155-159363636
160+373737

* Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance

Cars first registered from 6 April 2020
CO2 (g/km)Electric range (miles)2020-21 (%)2021-22 (%)2022-23 (%)
0N/A012
1-50>130012
1-5070-129345
1-5040-69678
1-5030-39101112
1-50<30121314
51-54131415
55-59141516
60-64151617
65-69161718
70-74171819
75-79181920
80-84192021
85-89202122
90-94212223
95-99222324
100-104232425
105-109242526
110-114252627
115-119262728
120-124272829
125-129282930
130-134293031
135-139303132
140-144313233
145-149323334
150-154333435
155-159343536
160-164353637
165-169363737
170+373737

* Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance