Taxation for Vehicle Purchase and Leasing 2020/21
Tax for Purchases (Cars)
For companies that purchase their vehicle they are allowed to claim capital allowances
• 0 to 50g/km = 100% 1st Year Allowances* – (0g/km from April 2021)
• 51 to 110g/km = 18% (Main Rate Pool) – (1 to 50g/km from April 2021)
• 111+g/km = 6% Pool (Special Rate Pool) – (51+ g/km from April 2021)
*Excludes leasing companies
For Contract Hire (Lease Rental)
- 0 to 110g/km = 100% of rentals allowable
- 111+g/km = 85% of rentals allowable
- This includes any unrelieved VAT (50%) (VAT not reclaimed in your quarterly VAT return)
- If the car’s CO2 is greater than 110g/km, unreclaimed VAT is also restricted to 85%.
- You can claim 50% of the VAT for the ‘basic rental’ element of the lease
- Additional costs of running a car, such as Maintenance & Repair (Additional Services) are eligible for a 100% VAT reclaim (subject to the company’s ability to recover VAT).
Light Commercial Vehicles (LCVs)
Purchases - you can claim 100% write down in year one via your Annual Investment Allowance (subject to an overall limit per financial year)
Contract Hire (Lease Rental) - you can claim 100% of the rental (before VAT) against your tax position providing:
- There is no private use (ST & Partnerships)
- You are a limited company
You can claim 100% of the VAT providing:
- You are VAT registered
- No Private use (Assumption there is not)
- You are not on the Flat Rate VAT scheme
- There is no ‘Exempt Turnover’
Private Fuel for Company Cars
Fuel benefit charge multiplier change
- A taxable benefit of £24,500 in the tax year 2020/21 – As at 6th April 202
- It will further increase by the CPI (Consumer Price Index) in 2021 (April)
Company Van Taxation
- Taxable benefit of £3,490 in the tax year 2020/21
- Fuel benefit of £666 in the tax year 2020/21 – As at 6th April 2020
- Total = £4,156
- 20% tax payer £831
- 40% tax payer £1,662
These figures will rise by the CPI (Consumer Price Index) in 2021 (April)
Advisory Fuel Rates 2020
Advisory Fuel Rate (AFR)
- New rates apply from 1 June 2020
- You can use the previous rates for up to 1 month from the date new rates apply
- Hybrid cars are treated as either petrol or diesel cars for this purpose
Advisory Electricity Rate (AER)
- The Advisory Electricity Rate for fully electric cars is 4 pence per mile.
- Electricity is not a fuel for car fuel benefit purposes.
International Financial Reporting Standards - IFRS16
- All current and future Lease activity (incl Contract Hire) is now accounted for as “On Balance Sheet” è Applies to any accounts produced on or after 1st January 2019
- Applies to anyone who reports under IFRS or UK GAAP (FRS 101)
Benefit in Kind (BiK) CO2 Bands by Tax Year (inc 2019/2020 rates)
Cars first registered before 6 April 2020
Vehicle CO2 Range (g/km) | Electric Range (Miles) | 2019 - 2020 %BIK Rate | 2020 - 2021 %BIK Rate | 2021 - 2022 %BIK Rate | 2022 - 2023 %BIK Rate | | | |
Petrol, EV, RDE2 Diesel | Non RDE2 Diesel | Petrol, EV, RDE2 Diesel | Non RDE2 Diesel | Petrol, EV, RDE2 Diesel | Non RDE2 Diesel | Petrol, EV, RDE2 Diesel | Non RDE2 Diesel | |
0 | 16 | 0 | 1 | 2 | | | | |
1-50 | 130+ | 16 | 2 | 2 | 2 | | | |
1-50 | 70-129 | 16 | 5 | 5 | 5 | | | |
1-50 | 40-69 | 16 | 8 | 8 | 8 | | | |
1-50 | 30-39 | 16 | 12 | 12 | 12 | | | |
1-50 | <30 | 16 | 14 | 14 | 14 | | | |
51-54 | 19
| 15 | 15 | 15 | | | | |
55-59 | 19 | 16 | 16 | 16 | | | | |
60-64 | 19 | 17 | 17 | 17 | | | | |
65-69 | 19 | 18 | 18 | 18 | | | | |
70-74 | 19 | 19 | 19 | 19 | | | | |
75 | 19 | 20 | 20 | 20 | | | | |
76-79 | 22 | 26 | 20 | 24 | 20 | 24 | 20 | 24 |
80-84 | 22 | 26 | 21 | 25 | 21 | 25 | 21 | 25 |
85-89 | 22 | 26 | 22 | 26 | 22 | 26 | 22 | 26 |
90-94 | 22 | 26 | 23 | 27 | 23 | 27 | 23 | 27 |
95-99 | 23 | 27 | 24 | 28 | 24 | 28 | 24 | 28 |
100-104 | 24 | 28 | 25 | 29 | 25 | 29 | 25 | 29 |
105-109 | 25 | 29 | 26 | 30 | 26 | 30 | 26 | 30 |
110-114 | 26 | 30 | 27 | 31 | 27 | 31 | 27 | 31 |
115-119 | 27 | 31 | 28 | 32 | 28 | 32 | 28 | 32 |
120-124 | 28 | 32 | 29 | 33 | 29 | 33 | 29 | 33 |
125-129 | 29 | 33 | 30 | 34 | 30 | 34 | 30 | 34 |
130-134 | 30 | 34 | 31 | 35 | 31 | 35 | 31 | 35 |
135-139 | 31 | 35 | 32 | 36 | 32 | 36 | 32 | 36 |
140-144 | 32 | 36 | 33 | 37 | 33 | 37 | 33 | 37 |
145-149 | 33 | 37 | 34 | 37 | 34 | 37 | 34 | 37 |
150-154 | 34 | 37 | 35 | 37 | 35 | 37 | 35 | 37 |
155-159 | 35 | 36 | 36 | 37 | 36 | 37 | 36 | 37 |
160-164 | 36 | 37 | 37 | 37 | 37 | 37 | 37 | 37 |
165+ | 37 | 37 | 37 | 37 | 37 | 37 | 37 | 37 |
From April 2018, HM Treasury levied a 4% diesel supplement over petrol models to account for greater levels of NOx emissions for the most current diesel cars.
The supplement applies to diesel cars not compliant with the Real Driving Emissions Step 2 (RDE2) test, which confirms that real-world emissions are close to, or better than, the Euro 6 emissions standards for NOx.
Benefit in Kind (BiK) CO2 Bands by Tax Year g/km
Cars first registered before 6 April 2020 | | | | |
Appropriate Percentage (%) | | | | |
CO2 Emissions (g/km) | Electric Range (Miles) | 2020/2021 | 2021/2022 | 2022/2023 |
0 | N/A | 0 | 1 | 2 |
1-50 | >130 | 2 | 2 | 2 |
1-50 | 70-129 | 5 | 5 | 5 |
1-50 | 40-69 | 8 | 8 | 8 |
1-50 | 30-39 | 12 | 12 | 12 |
1-50 | <30 | 14 | 14 | 14 |
51-54 | 15 | 15 | 15 | |
55-59 | 16 | 16 | 16 | |
60-64 | 17 | 17 | 17 | |
65-69 | 18 | 18 | 18 | |
70-74 | 19 | 19 | 19 | |
75-79 | 20 | 20 | 20 | |
80-84 | 21 | 21 | 21 | |
85-89 | 22 | 22 | 22 | |
90-94 | 23 | 23 | 23 | |
95-99 | 24 | 24 | 24 | |
100-104 | 25 | 25 | 25 | |
105-109 | 26 | 26 | 26 | |
110-114 | 27 | 27 | 27 | |
115-119 | 28 | 28 | 28 | |
120-124 | 29 | 29 | 29 | |
125-129 | 30 | 30 | 30 | |
130-134 | 31 | 31 | 31 | |
135-139 | 32 | 32 | 32 | |
140-144 | 33 | 33 | 33 | |
145-149 | 34 | 34 | 34 | |
150-154 | 35 | 35 | 35 | |
155-159 | 36 | 36 | 36 | |
160+ | 37 | 37 | 37 | |
Cars first registered from 6 April 2020 | | | | |
Appropriate Percentage (%) | | | | |
CO2 Emissions (g/km) | Electric Range (miles) | 2020/2021 | 2021/2022 | 2022/2023 |
0 | N/A | 0 | 1 | 2 |
1-50 | >130 | 0 | 1 | 2 |
1-50 | 70-129 | 3 | 4 | 5 |
1-50 | 40-69 | 6 | 7 | 8 |
1-50 | 30-39 | 10 | 11 | 12 |
1-50 | <30 | 12 | 13 | 14 |
51-54 | 13 | 14 | 15 | |
55-59 | 14 | 15 | 16 | |
60-64 | 15 | 16 | 17 | |
65-69 | 16 | 17 | 18 | |
70-74 | 17 | 18 | 19 | |
75-79 | 18 | 19 | 20 | |
80-84 | 19 | 20 | 21 | |
85-89 | 20 | 21 | 22 | |
90-94 | 21 | 22 | 23 | |
95-99 | 22 | 23 | 24 | |
100-104 | 23 | 24 | 25 | |
105-109 | 24 | 25 | 26 | |
110-114 | 25 | 26 | 27 | |
115-119 | 26 | 27 | 28 | |
120-124 | 27 | 28 | 29 | |
125-129 | 28 | 29 | 30 | |
130-134 | 29 | 30 | 31 | |
135-139 | 30 | 31 | 32 | |
140-144 | 31 | 32 | 33 | |
145-149 | 32 | 33 | 34 | |
150-154 | 33 | 34 | 35 | |
155-159 | 34 | 35 | 36 | |
160-164 | 35 | 36 | 37 | |
165-169 | 36 | 37 | 37 | |
170+ | 37 | 37 | 37 | |
Company car tax rates for 2023-24 and 2024-25 will be kept at 2022-23 rates.
If you drive a diesel company car, the diesel supplement is 4%.
- Applies to those cars propelled solely by diesel (not diesel hybrids) and registered on or after 1st January 1998, which do not have a registered Nitrogen Oxide (NOx) emissions value.
- Applies to models registered on or after 1st January 1998, which have a registered NOx emissions value which exceeds the RDE2 standard 80mg of nitrogen oxide per km
- Not applicable for diesel cars which are certified to the RDE2 standards. Diesel vehicle receive a “One Band” increase to its 1st years Vehicle Excise duty (VED).
- However, if it does meet RDE2 standards, then there is no band increase imposed.
Vehicle Excise Duty Rates 2020-2021
First tax payment when you register the vehicle – Applicable from 1st April 2020
You have to pay a higher rate for diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions. (You can ask your car’s manufacturer if your car meets the RDE2 standard).
CO2 emissions (g/km) & increase per band | Diesel cars (TC49) that meet the RDE2 standard and petrol cars (TC48) | All other diesel cars (TC49) | Alternative fuel cars (TC59) |
0 | £0 | £0 | £0 |
1-50 (+£10) | £10 | £25 | £0 |
51-75 (+£15) | £25 | £110 | £15 |
76-90 (+£85) | £110 | £135 | £100 |
91-100 (+£25) | £135 | £155 | £125 |
101-110 (+£20) | £155 | £175 | £145 |
111-130 (+£20) | £175 | £215 | £165 |
131-150 (+£40) | £215 | £540 | £205 |
151-170 (+£325) | £540 | £870 | £530 |
171-190 (+£330) | £870 | £1,305 | £860 |
191-225 (+£435) | £1,305 | £1,850 | £1,295 |
226-255 (+£545) | £1,850 | £2,175 | £1,840 |
Over 255 (+£325) | £2,175 | £2,175 | £2,165 |
This payment cover your vehicle for 12 months.
Rates for second tax payment onwards
Fuel type | Single 12 month payment | Single 12 month payment by Direct Debit | Total of 12 monthly payments by Direct Debit | Single 6 month payment | Single 6 month payment by Direct Debit |
Petrol or diesel | £150 | £150 | £157.50 | £82.50 | £78.75 |
Electric | £0 | N/A | N/A | £0 | N/A |
Alternative | £140 | £140 | £147.00 | £77.00 | £73.50 |
Alternative fuel vehicles include hybrids, bioethanol and liquid petroleum gas.
Vehicles with a list price of more than £40,000
You have to pay an extra £325 a year if you have a car or motorhome with a 'list price' (the published price before any discounts) of more than £40,000.
Fuel type | Single 12 month payment | Single 12 month payment by Direct Debit | Total of 12 monthly payments by Direct Debit | Single 6 month payment | Single 6 month payment by Direct Debit |
Petrol or diesel | £475 | £475 | £498.75 | £261.25 | £249.38 |
Alternative | £465 | £465 | £488.25 | £256 | £244.13 |
* Electric vehicles are exempt from this surcharge from April 2020.
You only have to pay this rate for 5 years (from the second time the vehicle is taxed - 6 years total).
Check the list price with your deal so you know how much vehicle tax you'll have to pay.
For further information on vehicle excise duties, refer to the Gov website.
*Information correct at time of printing
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