Company car tax from April 2020 will incentivise ultra-low emission vehicles based on their electric range, with fully-electric models getting their own Benefit in Kind band.

Changes to the Benefit in Kind system from 2020 will prioritise vehicles more likely to be driven on electricity

Announced during today’s Autumn Statement, it reintroduces a BiK band for 0g/km vehicles which had been removed last April, and adds a sliding scale for plug-in hybrid and range-extended electric models which emit 50g/km or less.

Replacing a single sub-50g/km band, it follows a consultation process announced in August which was aimed at providing “a clear incentive for manufacturers to move beyond vehicles with reduced CO2 emissions but limited electric mile range, which risk being driven in combustion engine mode most of the time.”

From April 2020, fully-electric cars will be taxed at 2%. Vehicles emitting between 1g/km and 50g/km – plug-in hybrids and range-extenders – will vary, with BiK bands between 2% and 14% depending on how far they can travel on battery power.

There will be a one percentage point increase per band, up to a maximum 37% rate, for cars emitting 90g/km or more. This is expected to raise an additional £30m in the 2020/21 and 2021/22 financial years, according to the Autumn Statement’s supporting documents.

Tax incentives for plug-ins have helped make the UK Europe’s largest market for plug-in hybrids in the first three quarters of 2016, with 25.9% of the region’s volume (19,694 units) registered here. Electric and hydrogen fuel cell vehicles totalled 8,107 units during the same period.