Home Science Car tax 2020: Full list of changes coming into effect this year

Car tax 2020: Full list of changes coming into effect this year

Updates to benefit-in-kind rates are coming into effect this April and will make electric vehicles more affordable than ever for company car owners. However, pressure groups are also trying to force the government’s hand to make updates to Insurance Premium Tax rates which could see overall costs slashed for young motorists. Car tax updates come a year after changes were made to pricing structures which introduced different road tax rules for newer vehicles. 

More electric cars on the road 

Chancellor Said Javid will announce changes to Benefit-in-Kind rates in next month’s budget which will see electric cars exempt from paying any charges. 

It means company car owners who purchase an electric car will be charged at 0 percent in benefit-in-kind rates which could dramatically increase the uptake of electric vehicles. 

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The updates to the policy are an attempt to drive more motorists into the electric car market to ensure the government hits their 2050 zero-carbon target. 

The updates mean motorists could save up to £1,000 per month on company car charges if they opt for an electric car over a traditional one.

READ MORE: Car tax changes could see a rise in company cars 

Car tax rules could change in 2020 (Image: Getty)

Young drivers may see rates slashed (Image: Getty)

Steve Beattie, head of business sales at Volvo Car UK said: “With the changes in legislation in company car tax for both BEVs and PHEVs, I think we will see a swing where fleet customers will be opting back in.

“If you look at an XC40 PHEV, from April that will be £160 a month in BIK for a 40% taxpayer and that is fully inclusive.

“You are not going to get a personal lease for that sort of car at that price with everything included. A lot of cars like that are more like £400 a month.”

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Alongside the benefit-in-kind reductions, electric cars are still exempt from paying any car tax as long as they emit zero-emissions and are valued at under £40,000. 

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Owners of fully EV machines do not need to pay any city congestion charges in another major win for motorists. 

Increased tax breaks are slowly making electric vehicles just as affordable as traditional vehicles despite the higher upfront costs. 

Ashley Barnett, head of fleet constancy at LexAutolease said: “Price parity between electric cars and their petrol and diesel counterparts isn’t expected until 2025, which is why fiscal support such as plug-in grants and low benefit in kind must be maintained in the interim.

Reduced costs for young drivers 

Alongside extra electric car tax breaks, rules could soon change regarding Insurance Premium Tax (IPT) rates. 

This is an extra 12 percent charge applied on top of all insurance premiums and currently hits young motorists hardest. 

This is because younger drivers are already required to pay average car insurance prices of over £1,000 and IPT charges are added on top of this. 

However, motoring pressure groups have pushed for changes to the system in order to reduce charges for those who mist need them. 

Speaking to Express.co.uk, David Stevens of car insurance company Admiral said: “We sincerely hope the Government has no plans to raise [IPT] further in the upcoming Budget. 

“For years we’ve argued that it’s a uniquely regressive tax, hitting those motorists hardest who can least afford it. 

“Young drivers, who are a higher risk and so typically pay more for their insurance, are particularly affected. 

“How can it be fair that an 18-year-old student has to pay four or five times as much tax on top of her insurance premium than her 48-year-old father?”

The AA has backed the proposal, claiming those under black box telemetry should not need to pay the charges.

However, data shows IPT rates have generated an extra £6.3bullion for the government over the 2018/19 financial year. 

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