Chancellor announces new company car tax rates in Budget

Written by: Simon Pavey, Last updated:7th September 2021

Blue mouse on top of receipts, pen to calculate taxes

The chancellor has confirmed changes to company car tax rates in the new Budget announced yesterday (March 11th 2020).

Rishi Sunak said anyone registering new fleet cars after April 6th 2020 will benefit from a tax cut of two percentage points. Zero-emission company cars will not be required to pay any tax at all.

Slow increases to help businesses

After this, company car tax rates will increase by just one percentage point in 2021-22 and 2022-23 respectively, which will bring them back to their published rates in existing legislation.

For vehicles registered between October 1st 1999 and April 5th 2020, tax charges will depend on CO2 emissions and the New European Driving Cycle (NEDC) procedure.

It was also revealed that a freeze on fuel duty will continue for another year.

The new measures will now need to be passed into law as part of the Finance Bill, which will take until after the start of the new tax year on April 6th 2020.

However, all drivers of company cars will receive information detailing how the new rates can be applied retrospectively.

The news will no doubt come as a relief to the fleet car industry, with these rates first announced and published by HM Treasury last year but delayed due to the ongoing confusion over Brexit.

Referred to as benefit-in-kind (BIK) tax rates, they were developed as a way of countering the potentially costly effects of the Worldwide Harmonsied Light Vehicle Test Procedure (WLTP) for testing vehicle emissions.

Ellie Baker, Brand Manager at Fuel Card Services, comments: “Many fleet owners may be pleased to hear they can now make plans concerning future vehicle investments with some light shed upon their tax liabilities. This could prove to be a real boost for the automotive industry in general.”