From April, company car tax will be scrapped for electric car buyers; experts predict big surge in demand for EVs
The electric car revolution is poised to hit the UK this year, but not because of purchase grants, green-shaming or European Union regulations. Instead, the expected sales boom is set to be driven largely by a change to company car tax regulations.
After the upcoming changes were announced in July 2019, sales of EVs doubled in the second half of the year compared with the first half, according to figures from the Society of Motor Manufacturers and Traders (SMMT). Business lease firm Alphabet reported a 165% rise in orders for plug-in vehicles.
The UK’s company car market is big business. Up to the end of November last year, 53% of cars sold went to fleets, SMMT figures show. Company cars aren’t free; they are a heavily taxed perk and, since 2002, the government has pegged the rate of duty to the car’s official CO2 emission figure. That move forced drivers out of thirsty petrol-engined cars and into more frugal diesels as companies sought to reduce the tax burden on their employees.
This year, however, the focus switches to plug-in cars. From April, people who choose electric cars will pay 0% company car tax: nothing at all.
“The fleet sector has a lot of pent-up demand, and this tax incentive could lead to a big surge in EVs,” said Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA).
Simultaneously, company car tax will for the first time be calculated using the CO2 figures generated by the new, tougher Worldwide Harmonised Light Vehicle Test (WLTP) regime. In short, the government is offering a huge, juicy carrot for drivers choosing electric and plug-in hybrid cars, and an extra whack of the stick for staying with conventional diesels or petrols.
Read more: Autocar