Taxation for Vehicle Purchase and Leasing 2020/21

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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