Transitioning to zero emission cars and vans
Last week, the Government published a delivery plan outlining the key timelines and milestones that are needed to support the transition to zero emission cars and vans, which included guidance on the current company car tax rates.
Citing cleaner air, healthier communities and tens of thousands of new green jobs, the Government has published their ‘greenprint’ to decarbonise all modes of domestic transport by 2050.
The document, "Transitioning to zero emission cars and vans: 2035 delivery plan", sets out commitments on investment as well as regulation and policy changes planned across the key areas of supply, demand and infrastructure. It also outlines the key performance indicators that will be used to monitor progress against the plan.
These Government commitments most likely to impact the fleet and leasing sectors include:
- Publishing an EV Infrastructure Strategy in 2021.
- Publishing a Hydrogen Strategy in 2021 to set out how we will develop the UK's hydrogen economy.
- Shifting the support of the Electric Vehicle Home Charger Scheme to focus on leaseholders, renters, and those living in flats from April 2022.
- Continuing to fund the plug-in van grant until at least 2022/23.
- Keeping benefit-in-kind (BIK) tax rates low for company cars, but only until March 2025.
- Introducing a new road vehicle CO2 emissions regulatory regime in 2024.
- Producing regular progress reports against the key performance indicators, updating the plan regularly and conduct a full progress review towards our phase out dates by 2025.
- Outlining their roadmap to ending the sale of new diesel cars and vans by 2030 and hybrid cars and vans by 2035.
- Continuing to fund the Workplace Charging Scheme until at least 2024/25.
- Phasing out the sale of new diesel and petrol heavy goods vehicles (HGVs) by 2040, subject to consultation.
Company car tax for electric vehicles to stay low until 2025
The inclusion of electrification is increasing among fleets, especially with company car drivers looking to make the switch into electric vehicles due to favourable tax rates. These latest commitments have again committed to keeping benefit-in-kind (BIK) tax rates low for company cars, but only until March 2025.
Company car drivers will pay no tax on a pure electric vehicle (EV) this tax year, while drivers of plug-in hybrid vehicles (PHEVs) are also enjoying much more favourable rates. The Treasury introduced a 0 percent BIK tax rate for pure electric company cars in 2020/21, rising to 1 percent for 2021/22 and to 2 percent in 2022/23 with zero emission cars exempt from vehicle excise duty (VED) until at least March 2025.
The roadmap, published by the Department for Transport (DFT), also says that companies and unincorporated businesses are eligible for enhanced capital allowances when buying a new zero emission car for business use. This allows for 100 percent of the cost of the car to be written off against the taxable income of the period in which it was bought. This, it says, will also be available until March 2025.