The government are moving away from the current test NEDC (New European Driving Cycle) of CO2 emissions on cars and are implementing a new test called ‘WLTP’ (World Light-Duty Test Procedure) which has been designed to gather data more accurately, based on the likely emissions of cars in real-life driving conditions. This new policy is for cars registered from 6th April 2020 only.
It is expected that the WLTP emission figures are likely to be higher for most petrol/diesel cars. However, to prevent an immediate increase in the taxable benefit of company cars, cars purchased after 6th April 2020 will see a reduction in the BIK rates in 2020/21 of 2%. This should mean that a car purchased in 2020 should have the same or a very similar BIK rate that it would have done using the previous NEDC test.
The car benefit rates for vehicles registered before 6 April 2020 will remain at their pre-announced rates.
The government will favour ULEZ vehicles – ultra-low emission vehicles – by incentivising the tax implications for tax year 2020/21 whereby the tax rates for some vehicles will plummet from 16% to 0%. As shown in the tax rate chart, the most tax efficient cars in the 2020/21 tax year will be those with CO2 emissions below 50g/km.
Depending on their electric range of miles, cars that emit between 1g and 50g per kilometre will fall into several bands, ranging from 0% to 14%. Meanwhile, diesel cars emitting over 140g/km and petrol cars over 160g/km will be taxed at the highest rate of 37%.
|Tax bandings and rates for tax year 2020/21||Registered before 6 April 2020||Registered after 6 April 2020||2019/20 tax rate (%)*|
|160 and above||37||35+||36+|
*+4% for diesel cars