Greener 2020: How Government Car Tax Rules Bring Back (Electric) Car Leasing Benefits

Driving electric cars is just one way to reduce our impact on the environment and our planet.

There are many benefits of electric cars versus vehicles that use fossil fuels. A new government car tax is making it more appealing to add electric car leasing as a benefit for employees who drive a company car. 

Keep reading to learn what the new vehicle tax rates could mean for fleet owners.

Benefits of Electric Vehicles

First, let’s review why putting more electric vehicles on the road matters.

The benefits of electric cars become clear when you consider the environmental impact. Since EVs don’t run on fossil fuels, they do not emit harmful CO2 emissions. For every car replaced with an EV, we can expect an average CO2 savings of 133.1g/km. 

It is cheaper overall to drive an EV as well. Drivers spend less on petrol (or nothing in the case of 100% EVs). They are also exempt from the London Congestion Charge, which makes driving in the city less costly. 

The Benefit to Fleet Owners

The new measure also represents a way for fleet owners to extend or increase benefits relating to company cars.

The Government announced that pure electric vehicles will not be subject to a benefit-in-kind (BIK) tax. There are two categories of vehicles; those registered after April 6, 2020, and those registered before April 6.

The company car tax on electric cars will essentially be 0%. Other types of electric and hybrid models will enjoy lowered BIK rates, as well.

Government Car Tax Changes

The changes regarding tax-exempt cars will go into effect in 2020, with only a slight increase every year.

100% electric cars:

  • No company car tax 2020/21
  • 1% in 2021/22
  • 2% in 2022/23

Cars that emit more CO2 will be subject to higher taxes on a sliding scale.

Examples:

  • CO2 miles – 1-50 (70 – 129 electric range miles) = 3% in 2020/21
  • CO2 miles – 1 – 50 (<30 electric range miles) = 12% in 2020/21
  • CO2 miles – 55 – 59 (no electric) = 14% in 2020/21

See a complete table for a comprehensive overview of the costs associated with different types of vehicles.

Clarifying the Law to Help You Make Future Decisions

There has been a lot of uncertainty for fleet managers in the last few years. The lack of clarity on the BIK tax made it difficult for companies to make decisions about which cars to buy and how to extend benefits to drivers.

The freeze on BIK for EVs makes it easier to develop strategic decisions while allowing fleet operators to play a part in the UK’s Road to Zero strategy.

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