Changes in company car benefit rates

From 6 April 2020 company car benefit rates will change again.

The benefit in kind is calculated based on the manufacturer’s list price of the car multiplied by the appropriate percentage.

The benefit is then treated as taxable income in the hands of the employee.  They will then pay tax on the car benefit at their marginal rate of tax, normally through PAYE.  In additional the employer will pay National Insurance on the benefit at 13.8%.

The appropriate percentage will depend on the co2 emissions of the car and – in some cases – the electric range.

The table below show the different car benefit rates based on vehicle co2 and electric-only range from 2018-2021:

CO2 Emissions (g/km)	Electric Range (miles)	2018/19 (%)	2019/20 (%)	2020/21 (%)
0	N/A	13	16	2
1-50	>130	13	16	2
1-50	70-129	13	16	5
1-50	40-69	13	16	8
1-50	30-39	13	16	12
1-50	<30	13	16	14
51-54		16	19	15
55-59		16	19	16
60-64		16	19	17
65-69		16	19	18
70-74		16	19	19
75-79		19	22	20
80-84		19	22	21
85-89		19	22	22
90-94		19	22	23
95-99		20	23	24
100-104		21	24	25
105-109		22	25	26
110-114		23	26	27
115-119		24	27	28
120-124		25	28	29
125-129		26	29	30
130-134		27	30	31
135-139		28	31	32
140-144		29	32	33
145-149		30	33	34
150-154		31	34	35
155-159		32	35	36
160-164		33	36	37
165-169		34	37	37
170-174		35	37	37
175-179		36	37	37
180-184		37	37	37
185-189		37	37	37
190 or over		37	37	37

 

There is also an extra 4% added to the appropriate percentage when the car is a diesel vehicle that is not compliant with Real Driving Emissions Step 2 (RDE2).  However please note that Diesel Hybrid cars are not subject to the 4% surcharge.

Example: A Scottish higher rate taxpayer (41%)

Audi A3 Saloon with Sport 30 TFSI 6-Speed 116 PS

List Price:            £23,560

CO2:                      117 g/km

 Nissan Leaf Acentra 40KWH Battery

List Price:            £27,995

CO2:                      0 g/km

Audi A3	2018/19	2019/20	2020/21
Benefit	£5,654	£6,361	£6,596
Employee Tax	£2,318	£2,608	£2,704
Employer’s NIC	£780	£878	£910
Nissan Leaf
Benefit	£3,639	£4,479	£560
Employee Tax	£1,492	£1,836	£229
Employer’s NIC	£502	£618	£77

 

As you can see, the tax and National Insurance due on more polluting vehicles increases year on year.  The position is different for electric cars, which will see large tax and National Insurance savings from 6 April 2020.

It is therefore worth considering whether it is appropriate to consider exchanging your current company vehicles for lower emission vehicles, particularly if the tax and National Insurance savings will be significant.

Photo by Sarah Cervantes on Unsplash