Company car benefit-in-kind tax rates will increase by three percentage points in 2019/20, it was confirmed in this week’s Budget.
Rates up to the end of 2018/19 were announced in last year’s Budget and company car benefit-in-kind tax tables published by HM Revenue and Customs reveal that in 2019/20 a car with CO2 emissions of 0-50 g/km will be subject to a rate of 16% of the P11D value of the vehicle; rising to 19% at 51-75 g/km and 22% at 76-94 g/km up to a maximum of 37% at 165 g/km and above.
However, in a move to encourage a new generation of low emission vehicles, the Government decided to increase tax rates on the two lowest thresholds - 0-50 g/km and 51-75 g/km by less than was previously planned.
In Budget 2014, the Government announced that in 2019/20 there would be a two percentage point differential between the 0-50 g/km and 51-75 g/km and the 51-75 g/km and 76-94 g/km bands.
That would have resulted in the 0-50 g/km band increasing by five percentage points in 2019/20 to 18% and the 51-75 g/km band increasing by four percentage points to 20%. The impact of increasing the two band rates more slowly - by three percentage points - than previously announced led Chancellor of the Exchequer George Osborne to proclaim that the government was encouraging demand.
However, many fleet industry bosses suggested that the steep tax rises would put the brakes on demand for electric and plug-in hybrid vehicles.
ACFO chairman John Pryor said: “Given the government’s focus on encouraging demand for electric and plug-in cars through a range of incentives, notably grants, ACFO would have expected the Chancellor to reduce company car benefit-in-kind tax rates, not increase them, on these vehicles.”