Company car tax rates 2020/21

11th March 2020

The Government is introducing changes to the existing company car benefits to include extra tax incentives for electric and low emission vehicles as part of its ambitious plans to lower emissions in the UK. The measures form part of its target to end the sale of traditional petrol and diesel vehicles completely by 2035. Read on to find out what’s changing and the company car tax rates for 2020/21.

Company car benefits 2020/21

What’s changing?

At present, car benefit is calculated based on list price and Co2 emissions with rates ranging from 16% to 37% of list price, depending on emissions. From April, the Government is introducing 15 new rate bands offering savings on low and zero emission vehicles.

Electric company cars registered after April 2020 will be completely exempt from income tax and National Insurance for 2020/21, while ‘ultra low emission vehicles’ (ULEVs) will be subject to very low rates.

There will also be new tax bands for plug-in hybrid cars capable of running on both petrol and electricity, which will now be taxed in accordance with their ‘electric range’ – the distance they can travel without using petrol.

The new measures provide businesses with an opportunity to pass on tax savings to their employees at the same time as reducing their environmental footprint – but will also add extra complexity when it comes to working out the tax cost.

The level of the benefit determines the amount of income tax the employee pays and the level of National Insurance contributions the employer will pay when the vehicle is made available for an employee’s private use.

And the tax savings may not be the full picture – low emission cars are still generally more expensive than their traditional counterparts and using purely electric vehicles can present practical issues because some areas still lack charging points.

Employers which provide company cars to their staff are required to report the value of the benefit to HMRC each year and will be responsible for ensuring the correct benefit rates are being applied.

Co2 emissions data and the electric range of hybrids can be obtained from the vehicle’s Certificate of Conformity. If leasing the vehicle, this can be obtained from the car leasing firm or fleet provider.

Company car tax rates 2020/21

From April 6 2020, the Government is introducing 15 new rate bands, with rates as low as 0% for newly-registered electric cars.

11 of the new bands will apply to hybrid ‘plug-in’ cars which can run off either electricity or petrol. The most efficient cars with a high electric range will be subject to very favourable rates of tax. Meanwhile hybrids at the other end of the scale will be taxed more in line with traditional non-electric vehicles.

In theory a hybrid with an electric range of more than 130 miles would be taxed in the same way as a purely electric vehicle – although no car currently on the market has a range this high.

Rates will also be different for cars registered after April 2020 compared with cars registered before that date. Cars registered after April 2020 will generally be subject to tax at a rate 2% lower. This is because the Government will begin using a different system for calculating emissions levels which will generally result in cars having higher emissions than under the old system.

It is expected that the new rates will rise by 1% over the following two tax years to bring them in line with the existing rates by 2022-23.

Company car tax rates 2020/21 (cars registered after April 6 2020)

CO2 emissions (g/km) Electric range (miles) Appropriate %
0 N/A 0
1-50 >130 0
1-50 70-129 3
1-50 40-69 6
1-50 30-39 10
1-50 <30 12
51-54 13
55-59 14
60-64 15
65-69 16
70-74 17
75-79 18
80-84 19
85-89 20
90-94 21
95-99 22
100-104 23
105-109 24
110-114 25
115-119 26
120-124 27
125-129 28
130-134 29
135-139 30
140-144 31
145-149 32
150-154 33
155-159 34
160-164 35
165-169 36
170+ 37


Company car tax rates 2020/21 (cars registered before April 6 2020)

CO2 emissions (g/km) Electric range (miles) Appropriate %
0 N/A 0
1-50 >130 2
1-50 70-129 5
1-50 40-69 8
1-50 30-39 12
1-50 <30 14
51-54 15
55-59 16
60-64 17
65-69 18
70-74 19
75-79 20
80-84 21
85-89 22
90-94 23
95-99 24
100-104 25
105-109 26
110-114 27
115-119 28
120-124 29
125-129 30
130-134 31
135-139 32
140-144 33
145-149 34
150-154 35
155-159 36
160+ 37


Talk to the experts

We know the new rules are a little confusing and we’d encourage you to talk to our tax team for further guidance. We would be happy to provide prospective tax calculations for businesses thinking of providing company cars to employees for the first time, or for businesses looking at more environmentally friendly options.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
to Accounts and VAT.