Over the past decade, company cars have been subject to more change than almost any other employee benefit. With all this disruption, it’s easy to think the glass is half full. But in every challenge lies an opportunity. And the government’s green driving regulations are no exception. We take you through the upcoming changes so you can minimise the financial impact for your business and reduce your company’s carbon footprint.
Which cities are introducing Ultra Low Emission Zones?
According to the government’s Clean Air Strategy: “Air quality is the largest environmental health risk in the UK. It shortens lives and contributes to chronic illness… Transport is a significant source of emissions of air pollution.”
With that in mind, it’s in all our interests to prevent rather than cure. In a bid to reduce emissions and improve air quality, health and lives, London has introduced the first ultra low emission zone (ULEZ).
Any vehicle, including cars, with emissions that don’t meet the ULEZ standards will be charged £12.50 per day if they enter a central area of the city.
This might not seem like a significant issue for your business right now. But London isn’t the only UK city introducing such charges and zones. There’s a long list of cities across the country that are in the process of introducing or deciding to launch similar zones, including:
- Greater Manchester
To keep ahead of these changes, avoid the fees and reduce your company’s carbon footprint, you might want to review your travel or company car policies. For example, consider asking staff to use park and ride facilities, prioritise public transport over driving or change your vehicles to greener alternatives.
The truth about fossil-fuelled vehicles
We all rely on data like fuel consumption and CO2 emissions to inform our choice of a new car. This information is particularly important when selecting a company car not only for the individual’s tax obligations but those of the company too.
However, the test to measure these items was originally devised in the 1980s and used theoretical models of driving that are not as accurate as real-life testing.
As a result, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) is being revised to ensure it provides accurate representations of vehicle efficiency and emissions. And the changes are due to hit in 2021.
What does this mean for company cars? The new WLTP measures could mean that your fleet is no longer as fuel efficient as you think. For example, VW found that the official CO2 figure for its Up GTI was 15% higher under the WLTP tests.
If this replicates across your fleet, you could find that your employer NICs and employee BIK rates suddenly jump. Making your company cars much more expensive than you had anticipated.
The solution? Look to greener cars with low emissions to beat the potential impact of WLTP testing. With lower energy costs too, your organisation will enjoy significant savings, particularly with the upcoming changes in benefit-in-kind tax rates.
Big changes in company car tax rates from April 2020
The government’s Road to Zero strategy aims for half of the UK’s new cars to emit 50g/km CO2 or less by 2030. And to achieve this goal, they’re using generous tax breaks to incentivise companies to introduce more green cars to their fleets.
From April 2020, Benefit in Kind rates will drop from 16% to 2% for cars emitting up 1-50g/km CO2 and travel more than 130 miles on electricity only. For pure electric cars drivers can expect to see 0% BIK from 2020-2021. For other cars emitting below 50g/km CO2, Benefit in Kind rates drop by as much as 11% from the current 16% to between 5% and 14% depending on the electric range in miles. All other ULEVs (cars emitting less than 75g/KM CO2) drop between 2-4% compared to their current 2019/20 rates.
Getting the best return on your company car investment and helping your employees to do the same means thinking ahead. With a punishing tax regime for those who continue to drive high emission vehicles, it’s time to avoid unnecessary costs and go green.