All change on company car tax from April

If you are changing your company car soon, make sure you understand the impact of next April’s new tax rules.

CO2 emissions have been the basis of company car taxation for over 15 years, with each new tax year usually seeing a nudge up in the scale charge for most emission levels. However, from 6 April 2020, the tax scales undergo a more radical set of changes:

  • For newly registered cars, the ‘real world’ WLTP measure of CO2 emissions will replace the existing and largely discredited NDEC basis (which will continue to be used as the tax scale yardstick for older vehicles). WLTP emission results are on average 20%–25% higher than NDEC figures.
  • For all hybrid cars with CO2 emissions of 1–50g/km, the scale charge will take account of the electric-only range.
  • The scale charge for zero-emissions cars will itself be nil in 2020/21, rising by 1% a year in the next two tax years.

To complicate matters further, from January 2021, all newly registered diesel cars must meet the RDE2 emissions standard, which exempts them from the current 4% diesel surcharge. Some RDE2-compliant cars are already on sale.

In July, the government published revised company car tax scales for the next three tax years (2020/21 – 2022/23), which take account of the reforms. In 2020/21, most of the scales will begin 2% lower than originally legislated for because of the sharper than anticipated increases in emissions under WLTP.

Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

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