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Company Car Tax & Capital Allowances

Capital Allowances – Ultra Low Emission Vehicles (ULEVs)

Enhanced Capital Allowances (ECAs) allow companies to write off the whole cost of an asset against taxable profits. This is available for cars with 50g/km or less. More polluting cars, those emitting up to 110g/km only qualify for 18% a year write down allowance. Over 110g/km qualify for a lower “special rate pool” writing down allowance of 8% a year.

Company Car Benefit in Kind (BIK) Taxation 2018 to 2021

Company car drivers are taxed on the ‘Benefit-in-kind’ (BIK) of their vehicle. This amount is based on the official value of the car – its retail price. Plus any extras fitted, such as leather seats, upgraded sound systems, wheels etc. A percentage of the official value of the car (‘P11D’) is calculated as income and tax accordingly. Employee’s income tax rate e.g. 20% basic rate, higher rate of 40% or even additional rate of 45%.

To encourage take-up of low emission vehicles, company car drivers who choose lower-polluting vehicles – both in CO2 and NOx emissions, will dramatically reduce their tax liabilities by selecting cars with lower emissions.

Diesel vehicles have a 4% diesel supplement over petrol models – imposed after the Volkswagen emissions scandal. Only diesel cars that pass the ‘Real Driving Emissions’ Step 2 (RDE2) test will not have this surcharge.

Electric vehicles have the lowest tax rates – making them more tax efficient than petrol or diesel cars. In the tax year 2020/21 this reduces to only 2% of the list price value.

2018/19
CO2 Emissions (g/km)
2018/19
% of list price
2019/20
CO2 Emissions (g/km)
2019/20
% of list price
2020/21
CO2 Emissions (g/km)
2020/21
% of list price
0-50 13 0-50 16 0 2
51-75 16 51-75 19 1-50
(split by zero
emission miles)
Range
>130 miles 2
70-129 miles 5
40-69 miles 8
30-39 miles 12
<30 miles 14
76-94 19 76-94 22 51-54 15
95-99 20 95-99 23 55-59 16
100-104 21 100-104 24 60-64 17
105-109 22 105-109 25 65-69 18
110-114 23 110-114 26 70-74 19
115-119 24 115-119 27 75-79 20
120-124 25 120-124 28 80-84 21
125-129 26 125-129 29 85-89 22
130-134 27 130-134 30 90-94 23
135-139 28 135-139 31 95-99 24
140-144 29 140-144 32 100-104 25
145-149 30 145-149 33 105-109 26
150-154 31 150-154 34 110-114 27
155-159 32 155-159 35 115-119 28
160-164 33 160-164 36 120-124 29
165-169 34 165+ 37 125-129 30
170-174 35 130-134 31
175-179 36 135-139 32
180+ 37 140-144 33
145-149 34
150-154 35
155-159 36
160+ 37

From 6 April 2018 drivers must add 4% (increased from 3% at Autumn Budget 2017) to the appropriate percentage if the car is propelled solely by diesel (up to a maximum of 37%). Cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel supplement.

Government funding packages are available for the take-up of plug-in vehicles charging stations, for both private, fleet and public sector organisations. More information on the grants available can be found at the Office for Low Emission Vehicles.

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