Government Announces Latest Company Car Tax Rates

Company car benefit-in-kind tax rates for the three years 2020/21 to 2022/23 have been announced by the Government.

The announcement, which sees company car benefit-in-kind tax rates for zero emission cars in 2020/21 cut to 0% from the previously announced 2% but all other already published rates remaining unchanged for cars registered before April 6, 2020, sees reduced rates for cars first registered from April 6, 2020.

The twin-track approach will remain in place for the two financial years 2020/21 and 2021/22 before company car benefit-in-kind tax rates realign in 2022/23.

The key company car benefit-in-kind tax decisions announced by the Government are that:

  • To accelerate the shift to zero emission cars, all zero emission models will be 0% rated in 2020/21, 1% in 2021/22 before returning to the planned 2% rate in 2022/23
  • For all other cars first registered before April 6, 2020 rates for 2021/22 and 2022/23 will be frozen at previously announced 2020/21 levels
  • For cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points in 2020/21 compared to those registered before April 6, 2020 before returning to planned rates over the following two years - increasing by one percentage point in 2021/22 and a further one percentage point in 2022/23 to align with rates for cars registered before April 6, 2020.

The announcement follows a Government review of company car benefit-in-kind tax in the wake of last year’s introduction of WLTP. The new vehicle emissions and fuel economy testing regime replaced the long-established New European Driving Cycle (NEDC) test.

Under WLTP testing carbon dioxide (CO2) values are typically higher 20-25% than under NEDC testing and, as a result, the Government ordered the review in a bid to limit the tax burden on company car drivers