The government has recently announced that from 2030, all new cars and vans will be banned from being petrol or diesel powered. Some new hybrid powered vehicles with “the ability to drive significant distance with zero emissions” will be allowed until 2035, although the details of this have yet to be published.
What might your company car look like in the future?
No, I am not talking car design here, but what might it look like in the eyes of HMRC? Successive governments have seen the company car as a taxation target via benefit in kind charges (BIK). HMRC raise significant sums of money from fuel duty and road tax.
2020-21 tax year
Since the beginning of the 2020-21 financial year, HMRC have offered significant BIK advantages to zero and low emissions cars (typically hybrids), whilst at the same time raising significant sums for petrol powered cars. Diesel drivers, for long the company car drivers motive power of choice, can face up to an additional 4% supplement on their BIK rate, depending on the level of emissions. Zero emissions cars are currently enjoying a zero percent BIK charge rate.
So, what about 2030?
I am going to have to get my crystal ball out here of course, although some things may perhaps be obvious as likely targets for HMRC.
On the assumption that the government will meet its stated target then it is hard to contemplate zero emissions company car drivers continuing to enjoy the current 0% rate of BIK. HMRC are unlikely to cut off such a valuable revenue stream.
Similarly, the low rates of BIK for hybrids must surely be a target for an increase in BIK rates? Electric vehicles (and hybrids) are generally more expensive than their petrol or diesel counterpart, so this could magnify the monthly tax charge to a company car driver should (when) HMRC raises BIK rates for these zero/low emissions cars.
Vehicle excise duty (road tax)
The current rates again treat zero emissions cars with £0 road fund license where the list price is under £40,000. There is a five-year supplement of £325 per year payable where the list price is above £40,000.
With the desire for longer range electric cars, comes a larger, heavier, and more expensive battery. The £40,000 limit (if it were to remain unaltered) could become a real barrier for the company car driver.
There is currently no BIK charge for charging your car at work, even for private use. In a similar way to the actual BIK on the car itself, it is hard to imaging HMRC continuing to be so generous to the electric company car driver.
Charging points are, of course, an interesting problem. Simply put, we currently do not have the infrastructure in place to support to support the likely demand.
This is a subject which has a habit of cropping up from time to time. As an alternative to replacing the duty on fuel, some form of road charging could be introduced. This could become a significant cost and issue, especially for the high-mileage company driver.
Petrol and Diesel
These vehicles will not simply disappear overnight. Remember that todays’ new company car is tomorrow’s second hand one. The used car market continues to be far larger (more than four times over in 2019 in the UK) than the new car market. Expect that those still with a fossil fueled company car come 2030 to be more heavily taxed as an “incentive” to make the switch to zero emissions.
Lease or rent?
Leasing a company car in the traditional way could be replaced by hourly/daily/weekly rental clubs which are already in their infancy. Quite how HMRC might view this remains to be ben seen, but I’m sure they will find a way of generating taxation income.
If you have a zero (or low) emissions company car currently, then enjoy the tax breaks whilst they are available.
Expect that the current generous taxation situation for the driver of a zero-emissions vehicle to change significantly between now and 2030.
One of the Directors of Optima, Kevin is responsible for the day-to-day running of the company. He is also responsible for the company’s Corporate Governance, financial planning and budgetary control, resource planning and our compliance with Health and Safety laws. He is, to say the least, analytical and highly organised. More about Kevin.