No logic for new car tax bands

13 December 2016

It is fair to say that the announcement in the Autumn statement appears to have created some confusion with employers and on the basis of what is proposed looks at odds with the tax which employees will be expected to pay in years up to 2019/20.  We will see up until 2019/20 an increasing benefit in kind on low emission vehicles which then at April 2020 gets substantially reduced by the proposals announced in the Autumn statement last week

The announcement split the Ultra low fleet (vehicles below 75g/km CO2 ) into 3 distinct groups:

  1. For cars of 51g/km CO2 and above there will be a percentage charge based on the specific emissions of the vehicle of between 15% and 19% of the list price.  So this is similar to what we see for higher CO2 emission fleet cars. 
  2. The specific complication arises for cars that are up to 50g/km CO2 emissions from 2020 who will see the taxable benefit they pay not simply dependent upon the CO2 emission of the vehicle  but by reference to  distance it can travel on electric. So for instance a car with an electrical range of between 30 -39 miles the percentage benefit charge will be 12%.   HMRC have released 5 specific bands to apply by reference to the electrical range of the car (see below) between 2% and 14%
  3. In the case of a purely electrical driven vehicle then again there will be a fixed percentage of 2%.


CO2 (g/km) Electric Range (miles)

2020 to 2021

0   2
1-50 >130 2
1-50 70-129 5
1-50 40-69 8
1-50 30-39 12
1-50 <30 14
51-54   15
55-59   16
60-64   17
65-69   18
70-74   19



We now have a situation of somewhat confusion which is largely driven by the reversal of the Government historically to remove the 3% surcharge on diesel only to re-instate this.  It is fair to say we are in a mess, if someone asks us to explain the logic behind the figures.  A real issue for the industry is whether an employer in light of the figures will decide to defer any move to diesel until post 20120 when these new rules come into force.  So these changes are hardly encouraging a move to a green policy by fleets in the short term.

Contact us

If you would like further information on the topics discussed in the article please contact Alastair Kendrick, speak to your local MHA MacIntyre Hudson advisor or send enquiry.