As part of its draft Finance Bill, the government has announced new Company Car Tax (CCT) rates for 2020-21 and beyond. Here’s LeasePlan’s guide.
Clarity on Company Car Tax (CCT)
After years of waiting, the run-up to this year’s draft Finance Bill delivered much needed clarity on Company Car Tax (CCT) for the years beyond 2020-21. The Government’s review into the effect of the new emissions tests on car taxes concluded that:
- To account for the higher carbon dioxide (CO2) scores that will result from the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), the previously published CCT rates for 2020-21 will, for most cars registered after 6 April 2020, be reduced by 2 percentage points.
- Cars with a zero-emission range of at least 130 miles will face a CCT rate of 0 per cent in 2020-21.
- These rates will then be increased by 1 percentage point in 2021-22 and then another percentage point in 2022-23.
- For most cars registered before 6 April 2020, CCT rates will not be reduced (from those previously published) in 2020-21. However, their rates will then be frozen for 2021-22 and 2022-23.
- Existing Vehicle Excise Duty (VED) rates will be maintained from April 2020, but the Government will this year consult on “moving towards a more dynamic approach to VED which recognises smaller changes in CO2 emissions”.
We welcome the Government’s response to the review of the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) and vehicle taxes, demonstrating ministers’ commitment to lower taxes for low-emission vehicles.
This is a milestone moment for the industry, as it is the first time company cars will pay no tax at all, following the announcement that zero-emission vehicles, along with hybrids that have an all-electric range of 130 miles, will have their taxes scrapped.
We also welcome the clarity that this announcement has brought to the tax years of 2021/22 and 2022/33, as well as the notable reduced rate at which the increase will occur, by 1 percentage point per annum.
Whilst the government is taking action, we are expecting higher CO2 figures on traditional fuels as we move to WLTP – it’s therefore essential that businesses work with their fleet providers to understand not just the costs involved, but the future fleet make-up and strategy – which will undoubtedly mean exploring the potential for low emission vehicles.
Matthew Walters, LeasePlan UK’s Head of Consultancy and Data Services.
Draft Finance Bill 2019-20
And what about the rest of the draft Finance Bill for 2019-20? It ought to be said that, even at the best of times, these are slightly peculiar documents. They are written in advance of the main Budget, which is released late in the autumn, and anticipate some of the tax changes that might be contained within it. The idea is that politicians can spend months thinking about and discussing these changes before passing the full Finance Bill after the Budget.
But this is not the best of times. Less than a fortnight after the publication of the draft Finance Bill, the Conservative Party will gain a new leader – and the country will gain a new prime minister. It’s not entirely certain that the new man will approve of the budgetary policies of the previous administration. This draft Finance Bill could end up as a preview of what might have been, had Theresa May and Philip Hammond remained in charge, rather than of what actually will be.
There is, of course, something else adding to the uncertainty: Brexit. The country was meant to have departed from the European Union in March; now that date has been pushed back to October. The government, whoever is in charge of it, is likely to be distracted until that moment comes.
Even after the publication of the CCT rates, there are still some questions left over from this year’s Spring Statement, including the possibility of a new system of VED for vans.
To find out more please speak to your LeasePlan Account Manager, or get in touch with a member of our expert team here.