Company Car Tax & Capital Allowances

Capital Allowances – Ultra Low Emission Vehicles (ULEVs)

Enhanced Capital Allowances (ECAs) allow companies to write off the whole cost of an asset against taxable profits. This is available for cars with 50g/km or less. More polluting cars, those emitting up to 110g/km only qualify for 18% a year write down allowance. Over 110g/km qualify for a lower “special rate pool” writing down allowance of 8% a year.

Company Car Benefit in Kind (BIK) Taxation 2018 to 2021

Company car drivers are taxed on the ‘Benefit-in-kind’ (BIK) of their vehicle. This amount is based on the official value of the car – its retail price. Plus any extras fitted, such as leather seats, upgraded sound systems, wheels etc. A percentage of the official value of the car (‘P11D’) is calculated as income and tax accordingly. Employee’s income tax rate e.g. 20% basic rate, higher rate of 40% or even additional rate of 45%.

To encourage take-up of low emission vehicles, company car drivers who choose lower-polluting vehicles – both in CO₂ and NO_x emissions, will dramatically reduce their tax liabilities by selecting cars with lower emissions.

Diesel vehicles have a 4% diesel supplement over petrol models – imposed after the Volkswagen emissions scandal. Only diesel cars that pass the ‘Real Driving Emissions’ Step 2 (RDE2) test will not have this surcharge.

Electric vehicles have the lowest tax rates – making them more tax efficient than petrol or diesel cars. In the tax year 2020/21 this reduces to only 2% of the list price value.

2018/19 CO₂ Emissions (g/km)	2018/19 % of list price	2019/20 CO₂ Emissions (g/km)	2019/20 % of list price	2020/21 CO₂ Emissions (g/km)	2020/21 % of list price
0-50	13	0-50	16	0	2
51-75	16	51-75	19	1-50 (split by zero emission miles)	Range
					>130 miles	2
					70-129 miles	5
					40-69 miles	8
					30-39 miles	12
					<30 miles	14
76-94	19	76-94	22	51-54	15
95-99	20	95-99	23	55-59	16
100-104	21	100-104	24	60-64	17
105-109	22	105-109	25	65-69	18
110-114	23	110-114	26	70-74	19
115-119	24	115-119	27	75-79	20
120-124	25	120-124	28	80-84	21
125-129	26	125-129	29	85-89	22
130-134	27	130-134	30	90-94	23
135-139	28	135-139	31	95-99	24
140-144	29	140-144	32	100-104	25
145-149	30	145-149	33	105-109	26
150-154	31	150-154	34	110-114	27
155-159	32	155-159	35	115-119	28
160-164	33	160-164	36	120-124	29
165-169	34	165+	37	125-129	30
170-174	35			130-134	31
175-179	36			135-139	32
180+	37			140-144	33
				145-149	34
				150-154	35
				155-159	36
				160+	37

From 6 April 2018 drivers must add 4% (increased from 3% at Autumn Budget 2017) to the appropriate percentage if the car is propelled solely by diesel (up to a maximum of 37%). Cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel supplement.

Government funding packages are available for the take-up of plug-in vehicles charging stations, for both private, fleet and public sector organisations. More information on the grants available can be found at the Office for Low Emission Vehicles.