New benefit-in-kind (BIK) tax rates will apply to all new company cars registered from today (April 6), with a zero-percentage rate for pure electric vehicles (EVs).

The new company car tax rates were published in the Spring Budget, after fleets had been waiting for them to be confirmed since they were first revealed last year. 

The annual BIK cost to a company car driver for a Kia E-Niro registered before April 6, for example, was £1,214 in 2019/20, but this falls to zero in 2020/21, £76 the following year and then £152 for the next three tax years up to and including 2024/25.  

Poppy Welch, head of Go Ultra Low, the joint Government and industry campaign to promote the uptake of electric vehicles, said: “The Government’s benefit-in-kind tax rates are the latest of a host of incentives on offer for people considering the switch to electric.

“We expect that this company car benefit will encourage further EV options to be introduced to fleets, as companies work to pass on the tax savings to their employees. It will also add further momentum to the UK’s EV market, which grew an impressive 21% in 2019.”

However, with company car tax now based on CO2 values from the new, stricter Worldwide Harmonsied Light Vehicle Test Procedure (WLTP) some company car drivers and fleets could end up paying more tax.

A new study from Cap HPI suggests that the average petrol, diesel or hybrid car has seen a 19.7% increase in CO2 under WLTP and BIK increases of £714 a year, while VED has jumped £300.

Average C02 values increased 26 grammes from 135g/km under NEDC to 161g/km under WLTP. The MPV sector saw an increase of 33% followed by large executive, 30% and SUV, 29%. The smallest percentage increase was seen in the supercar sector at just 8%.

The most significant increases in BIK were seen in the MPV sector at 3.5%, upper-medium, 3.3% and supermini, 3.2%. Luxury executive and supercar saw no increases.

Jonathan Clay, head of vehicle identification at Cap HPI, said: “The combination of the introduction of WLTP and a new tax regime aimed at encouraging private drivers and fleets to make greener motoring choices has driven up costs across the board. But it’s also clear that some sectors are more affected than others, which will undoubtedly drive a change in the shape of the UK car parc.”

For cars first registered from April 6, 2020, most company car tax rates will be reduced by two percentage points, with a new zero percentage rate for pure electric vehicles.

The percentages will then be increased by one percentage point for each of the tax years 2021 to 2022 and 2022 to 2023.

In the tax year 2022 to 2023, the increase will bring the percentages back to their published rates in existing legislation. (Full tables are available here).