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
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 Rate2020 - 2021 %BIK Rate2021 - 2022 %BIK Rate2022 - 2023 %BIK RatePetrol, EV, RDE2 Diesel Non RDE2 DieselPetrol, EV, RDE2 DieselNon RDE2 DieselPetrol, EV, RDE2 DieselNon RDE2 DieselPetrol, EV, RDE2 DieselNon RDE2 Diesel0160121-50130+162221-5070-129165551-5040-69168881-5030-39161212121-50<301614141451-541915151555-591916161660-641917171765-691918181870-7419191919751920202076-79222620242024202480-84222621252125212585-89222622262226222690-94222623272327232795-992327242824282428100-1042428252925292529105-1092529263026302630110-1142630273127312731115-1192731283228322832120-1242832293329332933125-1292933303430343034130-1343034313531353135135-1393135323632363236140-1443236333733373337145-1493337343734373437150-1543437353735373537155-1593536363736373637160-1643637373737373737165+3737373737373737
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
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 bandDiesel cars (TC49) that meet the RDE2 standard and petrol cars (TC48)All other diesel cars (TC49)Alternative fuel cars (TC59)0£0£0£01-50 (+£10)£10£25£051-75 (+£15)£25£110£1576-90 (+£85)£110£135£10091-100 (+£25)£135£155£125101-110 (+£20)£155£175£145111-130 (+£20)£175£215£165131-150 (+£40)£215£540£205151-170 (+£325)£540£870£530171-190 (+£330)£870£1,305£860191-225 (+£435)£1,305£1,850£1,295226-255 (+£545)£1,850£2,175£1,840Over 255 (+£325)£2,175£2,175£2,165This payment cover your vehicle for 12 months.
Rates for second tax payment onwards
Fuel typeSingle 12 month paymentSingle 12 month payment by Direct DebitTotal of 12 monthly payments by Direct DebitSingle 6 month paymentSingle 6 month payment by Direct DebitPetrol or diesel£150£150£157.50£82.50£78.75Electric£0N/AN/A£0N/AAlternative£140£140£147.00£77.00£73.50Alternative 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 typeSingle 12 month paymentSingle 12 month payment by Direct DebitTotal of 12 monthly payments by Direct DebitSingle 6 month paymentSingle 6 month payment by Direct DebitPetrol or diesel£475£475£498.75£261.25£249.38Alternative£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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