Just before Boris took over, the government published draft legislation proposing a change to the company car benefit-in-kind tax rates for the 2020/21 tax year and providing the much welcomed rates through to 2022/23.

Initially things do appear to become a little more complicated with the proposal for two BIK rates, one for cars registered before 6 April 2020 and one for those registered after. However, the fundamental difference between the two rates is not that difficult to fathom.

For vehicles registered before 6 April 2020 there is just one change to the previous rates, being to reduce the rate for wholly electric vehicles from 2% to nil in 20/21, 1% in 2021/22 and finally 2% in 2022/23, a welcome reduction from the current 16% rate. All other rates are proposed to remain unchanged throughout the three-year period.

For vehicles registered after 6 April 2020, in 2020/21 there is a proposed 2% reduction in rates compared to their earlier registered counterparts, except for wholly electric vehicles which will also attract a BIK rate of 0%. These rates will then increase across the board by 1% in 2021/22 and 2022/23.

The main winners if the legislation is passed as drafted, would be electric car users, particularly those with zero emissions who would pay very little tax indeed. However, while the 2% reduction across the rest of the board is welcome, it does come as benchmark CO2 emissions now follow “WLTP” standards, aimed at giving a more realistic (in many cases higher!) CO2 figure than the previous standards.

This article originally appeared in the Autumn edition of Wiltshire Business.