All Electric Cars Pay Zero Company Car Tax in 2020

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July 21st 2019
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All Electric Cars Pay Zero Company Car Tax in 2020

Government has published updated Company Car Tax bands up to 2023, with Electric Vehicles exempt from tax in 2020.

The government consulted on whether changes needed to be made to the way company cars are taxed, for both VED and Company Car Tax, back in December 2018. The consultation was brought about due to the move to the WLTP standard for testing vehicle emissions.

The WLTP is deemed more accurate when considering how polluting a vehicle is, as it simulates real driving in testing, and therefore a better figure to rely on when looking to reach the lowered national CO2 targets. The target is to reduce CO2 to a maximum of 20% of 1990 levels by 2050.

From all UK 'Transport' based CO2 emissions, around 90 percent are from 'Road' transport.

The consultation aimed for changes to make for first car registrations from April 2020 onwards. Vehicle emissions being reported using WLTP standards will inevitably be higher than previously. On average C02 values increased by between 20 and 25 percent compared to the previous NEDC standardised data, with skews up to 40 percent higher in smaller engines vehicles and as low as 7 percent higher in larger engined vehicles. Diesels are more affected than other fuels.

The initial impact on Tax would increase revenue for the Treasury by up to £600 million.

Moving forward past 2020, in order to not impact new vehicle registrations, the bands for current taxes would need adjustment to prevent negative impact. In addition, the majority of vehicles on sale by 2040 will be either fully electric or ULEV's and thus changes needed to account for this.

In response, the government has proposed the following:

EV and zero emission vehicles to be zero rated in 2020, but 1 percent tax in 2021 and 2 percent tax in 2022. This includes vehicles registered before April 2020.

Other existing VED rates and bands to remain the same as before WLTP, even past April 2020.

Some company car tax bands will be reduced by 2 percent for 2020, but return to 2 percent increases gradually over the following two years.

To calculate company car tax, multiply the P11d value of the car (list price + options) by the percentage from the table below and then multiply that value by your marginal tax rate (20,40 or 45 percent).

For example:

For a basic rate taxpayer with a 2020 registered vehicle value of £20,000 with emissions of 30 g/km and an electric range of 30 miles. The annual company car tax in 2020 would be, 20000 x 10% x 20%, which is, £400.

The new company car tax band tables for 2020 to 2023 is set out below:

Cars registered from April 6 2020

CO2 emissions (g/km) Electric Range (miles) 2020-2021 % 2021-2022 % 2022-2023 %
0 N/A 0 1 2
1-50 >130 0 1 2
1-50 70-129 3 4 5
1-50 40-69 6 7 8
1-50 30-39 10 11 12
1-50 <30 12 13 14
51-54 13 14 15
55-59 14 15 16
60-64 15 16 17
65-69 16 17 18
70-74 17 18 19
75-79 18 19 20
80-84 19 20 21
85-89 20 21 22
90-94 21 22 23
95-99 22 23 24
100-104 23 24 25
105-109 24 25 26
110-114 25 26 27
115-119 26 27 28
120-124 27 28 29
125-129 28 29 30
130-134 29 30 31
135-139 30 31 32
140-144 31 32 33
145-149 32 33 34
150-154 33 34 35
155-159 34 35 36
160-164 35 36 37
165-169 36 37 37
170+ 37 37 37

Cars registered before April 6 2020

CO2 emissions (g/km) Electric Range (miles) 2020-2021 % 2021-2022 % 2022-2023 %
0 N/A 0 1 2
1-50 >130 2 2 2
1-50 70-129 5 5 5
1-50 40-69 8 8 8
1-50 30-39 12 12 12
1-50 <30 14 14 14
51-54 15 15 15
55-59 16 16 16
60-64 17 17 17
65-69 18 18 18
70-74 19 19 19
75-79 20 20 20
80-84 21 21 21
85-89 22 22 22
90-94 23 23 23
95-99 24 24 24
100-104 25 25 25
105-109 26 26 26
110-114 27 27 27
115-119 28 28 28
120-124 29 29 29
125-129 30 30 30
130-134 31 31 31
135-139 32 32 32
140-144 33 33 33
145-149 34 34 34
150-154 35 35 35
155-159 36 36 36
160 and over 37 37 37

Changes to VED structures will be revealed later in the year and will likely affect vehicles at the lower end of the CO2 emission scale.

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