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Company Car Tax Changes In 2020

Some pretty significate changes ...

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Posted by Helen Beaumont on 15/01/2020 @ 8:00AM

There are a number of changes happening to company car tax rules in 2020. Here's a summary of how you'll be affected whether you're the employee or the employer ...

If you're thinking of changing your company car, then waiting until after 6th April 2020 may be a good idea!

If you're thinking of changing your company car, then waiting until after 6th April 2020 may be a good idea!

copyright: aprior / 123rf

Company cars have always been a popular benefit for employees, however, both the employee and the employer need to consider the tax implications. Remember, if you use your company car for any form of private travel, you will have to pay tax for the privilege.

"Even more so if the business pays for the fuel for your private journeys!"

If fuel is free or subsidised by the employer for private use, then the employee must pay income tax on this benefit. As to how much, well, that depends on the fuel efficiency of the vehicle's engine, not how much fuel is provided. This has become less popular over time because of the increasingly punitive tax bills. This changes further in 2020 with the tax regime favouring greener cars.

The new rules from 2020 mean company car drivers choosing fully electric vehicles (known as EVs) will no longer pay benefit-in-kind (BIK) tax in 2020/21. The government is doing this in the hope of selling more and more emission-free cars.

It applies to:

  • zero-emission vehicles registered either before or after 6th April 2020

  • vehicles with emissions up to 50g/km with an electric range of at least 130 miles registered on or after 6th April 2020

Initially, the second group were going to get a 2% rate, but it seems the treasury are adjusting that down to 0%. Vehicles up to 50g/km that are unable to reach 130 miles on electric power will get lower rates, but we're not sure what they are at the moment.

"Remember, the date the car was registered determines the rate for hybrid cars!"

Any hybrid that can reach up to 69 miles on electricity only received an 8% tax rate if it was registered before 6th April 2020, or just 6% when registered after that.

This pre/post disparity can be seen across the new company car tax rules. Anything registered before the 6th April 2020 will be taxed at 2% more than those registered after with that disparity being adjusted up (to the higher rate) after two years.

The Government see these changes as a welcome benefit for company car drivers of zero or very low emission vehicles. Employers also benefit as lower tax means lower Class 1A National Insurance charges.

The most significant change is the reintroduction of a zero tax rate for vehicles that can run on pure electricity for more than 130 miles at a time.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.