Delivered on 11th March, the 2020 budget was dominated by measures to minimise the economic impact of the coronavirus (COVID-19). Chancellor of the Exchequer, Rishi Sunak warned MPs that there would be a “significant but temporary disruption” to the UK economy but insisted that “we will get through this together”.
Those measures included new company car tax rates for the coming financial year. Read on to find out more.
2020 company car tax rates
While many companies across the UK will have the coronavirus pandemic on their mind, the good news is that there is a confirmed reduction of most company tax rates by 2% in 2020/21 for cars registered from 6 April 2020. Fully electric vehicles will attract a new zero rate.
Rates will return to planned levels over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23. Rates will then be frozen until 2024/25. This move will also include electric vehicles, which will increase by 1% year-on-year moving forward.
CO2 emission thresholds
Planned adjustments will be made to the CO2 emission thresholds for capital allowances on business cars by extending first-year allowances to zero-emission vehicles. The government aims to bring forward the phase-out of new petrol and diesel cars and vans by five years – moving it from 2040 to 2035. This is part of the wider policy on climate change to reduce all greenhouse gas emissions from the UK to net-zero by 2050.
This strategy also reduces the carbon dioxide emission thresholds, which are used to determine the rate of capital allowances available for company cars. To encourage the use of zero-emission vehicles (ZEVs) and ultra-low emission vehicles (ULEVs), from April 2021, the government will extend first-year allowances to ZEVs only and apply the main rate writing down allowance (WDA) of 18% to cars with emissions up to 50g/km.
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