HMRC encourages a shift to more environmentally-friendly vehicles.

The Government’s aim to reduce pollution and improve air quality in the UK and encourage people to invest in more environmentally friendly vehicles, has brought about a revision of the Appropriate Percentages used in the Benefit In Kind (BIK) calculations, particularly for Ultra Low Emission Vehicles (ULEVs).

HMRC has confirmed that these new calculation bands will be implemented from April 2020. There will be 11 new bands for ULEVs as well as the inclusion of a separate zero emissions band for wholly electrically powered vehicles.

It was announced by HMRC that company car drivers using zero emission cars will pay no company car tax in 2020-2021. This is an initiative that is being put into place in order to influence people to shift to the use of zero emission cars in a bid to help the environment. In 2021-22, the tax rate will increase to one percent before returning to the planned two percent in 2022-2023.

In the Autumn Budget 2017, the government announced that cars registered from April 2020 will be taxed based on Worldwide harmonised Light vehicles Test Procedure (WLTP) figures. WLTP aims to be more representative of real world driving conditions, compared to the previous test known as the New European Driving Cycle (NEDC). As a result, reported emissions are expected to increase which could impact Vehicle Excise Duty and company car tax.

This has resulted in the Appropriate Percentages for vehicles registered prior to April 2020 (NEDC rated) to have their percentage values set at the 2022/2023 rate that will be used for vehicles registered after April 2020 (WLTP rated), allowing 3 years for the WLTP tested vehicles to “catch up” to the same rate (they have a lower starting rate due reflect the more stringent tests). This excludes zero emission vehicles which remain unaffected by this new test and therefore follows the newly introduced rate irrespective of their registration date.