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Changes in tax rates for electric cars and low emission vehicles

by | Oct 26, 2018 | Personal finance

From April 2020, the company car benefit system will be changing significantly and as a result, zero and low emission vehicles might become very attractive. The changes – designed to support the use of ultra-low emission vehicles (ULEVs) and to support the UK’s ULEV market, should also help address the issues around poor air quality and reduce the effects of global warming. The Government’s aim is to have us all driving zero-emission vehicles by 2040.

At the moment, running a company car can result in a significant benefit in kind charge for an employee, or director. However, from April 2020, zero and low emission vehicles will attract a 2% charge, compared to the current rate of up to 21%.

For example, if you drive a BMW i3, which has no Co2 emissions, the current tax charge could be approx. £4,334 whereas from the 2020/21 tax year, this would reduce to £667!

In addition to this, there are proposals to scrap the fuel benefit charge on electric cars since electricity is not class as a fuel for tax purposes.  

To encourage employers even more, the Government is providing grants of up to £4.500 on such vehicles.

If you are looking to change your car in the near future, waiting until 2020 will not only help the environment but also your tax bill! 

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