The government has released the response to ‘Review of WLTP and vehicle taxes’ which sought evidence on the impact of a proposed change to the method of measuring CO2 emissions for Company car tax from April 2020.
Since 2002 Company car tax has been based on the CO2 emission rating of the vehicle. Currently this is measured by the new European Driving Cycle (NEDC) test. From April 2020 it is proposed that new cars will be measured under a different, more rigorous test, the WLTP.
Data provided by respondents to the review indicates that:
- The new method will result in average CO2 values 20-25% higher than currently.
- Smaller and lower emission cars will be the most badly affected whilst those with high C02 will suffer a lesser impact.
As the proposed changes will mean that company car tax may increase, to help with this the government has announced the following short term measures:
- For cars first registered from 6 April 2020, the appropriate percentage when calculating the car benefit will reduce for most cars by 2% in 2020/21. It will then increase by 1% in 2021/22 and in 2022/23
- Users of zero emission company cars will pay no company car tax at all in 2020/21. The appropriate percentage for calculating the car benefit will be 1% in 2021/22 and 2% in 2022/23.
- A call for evidence will be published later in 2019 seeking views on moving towards a more dynamic approach to VED which recognises smaller changes in CO2 emissions.
For cars registered before 6 April 2020, HMRC will continue to use the current test procedure. The government is considering the impact on vans as a separate matter.
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