Page 15 - Budget 2021

Employees

Company Cars

The company car benefit scales underwent radical changes at the start of 2020/21:

• For cars registered since 6 April 2020, CO2 emission levels have been based on WLTP figures. The WLTP test is
much closer to a ‘real world’ test, producing results 20%-25% higher than the largely discredited NEDC test, which
still applies for cars registered before 6 April 2020.

• The scale charge for zero emission cars (eg. electric-only) fell to nil in 2020/21 and will rise to 1% in 2021/22 and
2% in 2022/23. That helps to explain why the Tesla Model 3 was the UK’s best-selling car in December 2020.

• For hybrid cars registered from 6 April 2020 with CO2 emissions of 1g/km-50g/km, the scale charge is based on
the electric-only range figure, varying in 2020/21 from 0% for a range of at least 130 miles to 12% if the range is
below 30 miles. In 2021/22 these rates increase by 1%. For older hybrid vehicles with emissions of up to 50g/km,
the scale charge in 2020/21 and 2021/22 ranges from 2% to 14%.

For 2021/22, there will be no change in the scale rate for pre-6 April 2020 registered cars, but newer vehicles will
generally see a 1% increase. Two other 2021/22 factors to watch are:

• All newly registered diesel cars now have had to meet the RDE2 emission standards (cutting NOx emissions
significantly), although in practice many were meeting the revised standard in 2020. Cars that satisfy the RDE2
standard are exempt from the 4% car scale surcharge that would otherwise apply to diesels/

• The maximum charge has remained at 37% and, in 2021/22, will apply for petrol engine and RDE2 diesel engine
cars with emissions of 165g/km and above registered from 6 April 2020, and 160g/km and above for older
vehicles. The corresponding limits for non-RDE2 diesel engine cars are 145g/km and 140g/km respectively.

PLANNING POINT

If you are changing your car soon, think ahead to what it will cost you in tax terms on these scales. It may make
sense to accept cash instead of a new car, switch to a hybrid vehicle or choose an electric-only car.

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