Treasury provides additional clarity on company car tax

“It is positive to see that the Government has provided additional clarity on the tax regime for company cars”, Sue Robinson, Director of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle retailers in the UK. 

At the 2018 Budget, it was announced that the Treasury would have examined the impact that the introduction of WLTP would have had on vehicle taxes, including BIK and Vehicle Excise Duty (VED). 

NFDA responded to the consultation from the Treasury launched in February 2018. The key question asked how the Government should have balanced the key factors when considering whether to introduce changes to VED and company car tax following the introduction of WLTP. 

Overall, NFDA called for more clarity on BIK rates and highlighted the economic and political factors already putting the motor industry under pressure. As a result, we urged the Government to consider these when looking at WLTP’s introduction into the tax regime to minimise further impact on the sector.

Today, HM Treasury announced that tax percentages for BIK will be reduced by 2 percentage points in 2020-21 before returning to planned rates over the following two years – increasing by 1 percentage point in 2021-22 and 1 percentage point in 2022-23. This will apply to company cars first registered from 6 April 2020. Additionally, all zero emission company cars will attract a reduced rate of 0% in 2020-21, 1% in 2021-22, before returning to the planned 2% rate in 2022-23.

Existing VED rates will be maintained from April 2020. However, a call for evidence will be published later this year. This will seek views on moving towards a more dynamic approach to VED which recognises changes in CO2 emissions.

Robinson added, “Further clarity on the company car tax regime, alongside the introduction of a zero-emission rate for company cars, will support the sales new vehicles.

“Although we are disappointed that, following the introduction of WLTP, the existing VED rates will remain in place, it is encouraging that the Government will continue to consider whether to move to ‘a more dynamic approach to VED’ as suggested by NFDA.

“NFDA will continue to call on the Government to rebalance VED payments across a car’s lifetime to incentivise purchases of newer, cleaner vehicles*".