company car tax changes

Driving changes in company car tax

Do you know your WLTP from your NDEC? If you drive a company car or administer a company car scheme it pays to understand the distinction between the two.

And you may also want to review your company car needs in the light of changes to the tax rules coming in next year.

New vehicle emissions measuring standards coming in from 2020 mean the tax benefits from company cars may not be as useful as they once were.

The changes come as new figures from the UK reveal the rising tax burden for company car drivers. On average company car tax is now a staggering 50 per cent higher than it was 2009.

WLTP is the Worldwide Harmonised Light Vehicles Test Procedure, the latest way to measure vehicle emissions and fuel consumption based on something approaching real world data.

For cars registered from April 6, 2020, the WLTP figures will be the yardstick for company car tax – and vehicle excise duty.

NDEC is the New European Driving Cycle. Last updated in 1997, for years has provided emission and fuel consumption measures and is the current basis for company car tax.

To confuse things further NDEC numbers are being published that are calculated by adjusting the WLTP figures which manufacturers now must produce.

The switch from the older, inaccurate NDEC to the more realistic WLTP has resulted in increases to measured CO2 emission figures.

The size of the increase varies between vehicles, but European Commission research in 2017 suggested an average of 22 per cent for petrol cars and 20 per cent for diesels, with smaller engines attracting the largest rise.

Company car tax scales for 2020/21, when WLTP starts to apply to new vehicles, were set back in 2017, before the full impact of WLTP was understood.

Last month the Treasury announced that the company car scale rates set in the Finance (No 2) Act 2017 for cars registered after April 5, 2020, would all be cut by two per cent in 2020/21 and one per cent in 2021/22. NDEC figures will continue to be used for older cars.

There is some good news. In the next tax year electric-only vehicles will have a taxable benefit of zero – at present the benefit is 16 per cent of their list price.

The bad news is that other newly registered cars will mostly see an increase in their benefit value over the 2019/20 figure because of the higher WLTP measures of CO2 emission.

For example, a £30,000 petrol car with 104g/km NDEC emission now (and a 2019/20 taxable benefit of £7,200) could have WLTP emission figure of 126g/km, implying a 2020/21 benefit value of £8,400 if registered after April 5, 2020.

If you are due to change your company car in the next year, make sure you know what tax you are going to pay for it. It might be worth making sure the car is registered before April 6 2020.

And it could also make sense to review whether a company car now makes financial sense.

To discuss any issues arising from this article or any tax issues you may be facing please contact me on 01772 430000.