Mark Brewer Senior Partner

How can I make sure any new company car I get is tax efficient?

From 6th April 2020, substantial changes on car benefit came into force. These changes were made primarily to encourage the purchase of zero emission and hybrid vehicles by increasing the tax benefits of doing so. Since then, the percentages used for calculating the benefit in kind value of cars have changed a little, but the overall objective of making zero/ultra-low emission cars much more attractive for tax has remained. Please see below for a table comparing the 2021/22 and 2022/23 percentages, which will help you calculate the BIK value of any new vehicle you might be considering.

Zero emission carsThe government are keen to promote the use of all zero emissions vehicles, including Electric vehicles (EV), Extended range EV’s (EREV), Battery electric vehicles (BEV) and Fuel cell electric vehicles (FCEV).

To encourage more companies and employees to take these as company vehicles, a 0% company car tax rate was introduced for 2020/21 (i.e. no company car tax), followed by 1% in 2021/22 and 2% in 2022/23.

Hybrid carsRules on hybrid vehicles, including Full hybrid (FHEV), Mild hybrid (MHEV) or Plug-in hybrids (PHEV), also changed, to introduce more favourable tax rates, especially for those cars with a higher zero emissions range.

Van BenefitThe van benefit charge for 2022/23 will increase to £3,600. However, zero emissions vans have had a nil rate of tax since 6 April 2021 and will continue to do so.

Fuel BenefitCar fuel benefit for 2022/23 will be the relevant percentage of £25,300.  Van fuel benefit will be £688.

Car benefit rates

The table below applies to any new company cars that you may be taking on and it should be kept in mind that different rates may apply to some second-hand cars, particularly diesels. It is currently anticipated that the rates shown below for 2022/23 will be frozen until 2024/25.

    FY 2021-22 %BIK Rate FY 2022-23 %BIK Rate
Vehicle CO2 emissions (g/km)  Electric range (miles) Petrol, Electric, RDE2 Diesel Petrol, Electric, RDE2 Diesel
0   1 2
1 - 50 130+ 1 2
1 - 50 70 - 129 4 5
1 - 50 40 - 69 7 8
1 - 50 30 - 39 11 12
1 - 50 < 30 13 14
51 - 54   14 15
55 - 59   15 16
60 - 64   16 17
65 - 69   17 18
70 - 74   18 19
75 - 79   19 20
80 - 84   20 21
85 - 89   21 22
90 - 94   22 23
95 - 99   23 24
100 - 104   24 25
105 - 109   25 26
110 - 114   26 27
115 - 119   27 28
120 - 124   28 29
125 - 129   29 30
130 - 134   30 31
135 - 139   31 32
140 - 144   32 33
145 - 149   33 34
150 - 154   34 35
155 - 159   35 36
160 - 164   36 37
165 - 169   37 37
170 +   37 37
For more information on how we can help you and your business please contact us at info@oldfieldadvisory.com or call 02476673160.

Please note: This article is provided for information only and was correct as at time of writing (18/03/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.