Electric cars set to be exempt from company tax in 2020

Businesses looking to add electric vehicles to their fleets are set for a boost next year — with battery-powered cars set to be exempt from company tax in 2020.

Following a review of the changes to the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) regulations, the Treasury has abandoned benefit-in-kind charges (BiK) on electric cars next year.

As a result, cars emitting less than 50g/km of CO2 and capable of at least 130 miles of electric range will be covered by a zero per cent BiK rate from April 6t next year. This stretches to hybrids and plug-in hybrids, though no models fitting these criteria are currently available in the UK.

Charges will apply from the 2021/22 financial year though, with a one per cent BiK rate on these vehicles, which will increase to two per cent in 2022/23. A two per cent rate had originally been planned to be applied in 2020/21.

A statement from the Treasury said it “recognises the value of the company car market in supporting the transition to zero-emissions technology” and also considers that by encouraging more company car drivers into low-emission cars, it can help generate “a competitive second-hand market in these vehicles”.