Company cars: new tax bands for ultra-low emission vehicles

19 January 2017

As part of the 2016 Budget, the Government announced that it would consult over the Summer on changes to the ultra-low emission vehicles (ULEV) bands for taxing company cars, to ‘focus incentives on the very cleanest cars’. As a result of the consultation, HMRC have now published details of 11 new bands, which will be introduced for ULEVs with emissions below 75 gCO2/km from 2020/21, including a separate zero emission band.

Some of the lowest CO2 bands are based on the ‘electric range’ of the vehicle, as well as the CO2 emissions. The electric range is the maximum distance the vehicles can travel in pure electric mode without recharging the battery or using the combustion engine of the plug-in vehicle. The aim is to distinguish between ULEVs with different plug-in hybrid technologies and improved battery range, which will focus incentives on the very cleanest cars that allow most journeys to be zero emissions.

The seemingly complex provisions are included in the Finance Bill 2016 and provide that, from 6 April 2020, the graduated table of company car tax bands will include a differential for cars with emissions of 1 to 50 gCO2 per km based on the electric range of the car.

  • for cars with an electric range of 130 miles or more, the appropriate percentage will be 2%;
  • for cars with an electric range of between 70 to 129 miles, the appropriate percentage will be 5%;
  • for 40 to 69 miles, the appropriate percentage will be 8%;
  • for 30 to 39 miles, the appropriate percentage will be 12%;
  • for less than 30 miles, the appropriate percentage will be 14%; and
  • for cars that can only be driven in zero-emission mode, the appropriate percentage will be 2%.

For all other bands with CO2 emissions of 51 gCO2 per km and above, the appropriate percentage will be based on the CO2 emissions only. For cars with emissions of 51 to 54 gCO2 per km the appropriate percentage is 15%. For cars with emissions above 54 gCO2 per km, the bands are graduated by 5g CO2 per km and the appropriate percentage increases by 1% for each 5 gCO2 per km band. For example, 16% for 55 to 59, 17% for 60 to 64, up to a maximum of 37%. For cars with emissions above 90 gCO2/km, the appropriate percentage will increase by 1% in comparison to 2019/20 levels.

If you would like to discuss these new tax bands, please contact me, Martin Johnson, or your local UHY adviser.