Company Car Tax for Ultra-Low Emission Vehicles

Everything you need to know about company car tax for ultra-low emission vehicles
company car tax for ultra low emission vehicles

If you’re looking at company cars, you have probably heard the words ‘ultra-low emission vehicle’ thrown about. And there is a reason for this.

Ultra-low emission vehicles (ULEV’s) are about to become extremely attractive to those who are looking for a company car, and there are a few reasons why this is.

In this article we’re going to look at company car tax for ultra-low emission vehicles, and take a look at some of the ULEV’s on the market today.

What is an ultra-low emission vehicle?

Firstly, what is a ULEV?

An ultra-low emission vehicle is just that, its low emission. More specifically, an ultra-low emission vehicle emits 75g/km of CO2 or less. These include electric cars and plug-in hybrids (plus one standard hybrid but we’ll come onto that later). There aren’t that many ULEV’s on the roads as of yet, but it won’t be long before we start seeing them more and more.

blue car parked being charged up by an electric charging point

Are ultra-low emission vehicles exempt from company car tax?

Currently, yes, they are. If you purchased a ULEV tomorrow, or next week, or basically any time up until April 2017, then you won’t have to pay anything in company car tax.

However, come April 2017, you will have to pay a small amount in company car tax.                              

This is because of the changes announced in the Autumn Statement 2016.

The Autumn Statement and ultra-low emission vehicles

In the Autumn Statement 2016, Chancellor Philip Hammond announced a huge shake up in regards to company car tax and salary sacrifice schemes. These changes will hugely affect you if you have a company car, and not in a good way. Sorry to be the bearer of bad news.

There are two lots of huge changes coming in come April this year (2017).

The first change is that there are new bands being introduced, fifteen to be exact. And eleven of these bands are going to be introduced for the low-emission vehicles.

What is an Ultra-Low Emission Vehicle?

New car tax bands have not been introduced since 2003. And at that time, there weren’t many low-emission cars on the roads, and they certainly weren’t popular with businesses. So, in an attempt to encourage employers and employees to go for low-emission cars, they made any car that emitted less than 99g/km of CO2 exempt from company car tax. This incentive worked, and now there are plenty of low-emission cars out on our roads that are paying absolutely nothing in company car tax.

Can you see where I’m going with this? Because there are now so many low-emission cars on the roads, the government have introduced new bands for those vehicles that emit less than 99g/km of CO2 so that now even the vehicles that emit absolutely nothing in CO2 will still have to pay company car tax. Of course, you won’t have to pay too much if your car emits less than 99g/km of CO2, but you will have to pay something. You can see the new bands in the table below.

And that’s not all. If you’re reading this article you could well be aware of it already, if not, the read on.

The government have also announced that there will be changes to how salary sacrifice schemes are taxed. Currently, salary sacrifice schemes such as childcare vouchers, mobile phones, laptops and company cars are taxed less than their cash equivalent (or are not taxed at all). This, however, will change as of April 2017. Instead, some salary sacrifice schemes will be taxed as their cash equivalent. These include company cars.

So, if your cars BIK rate is lower than the cash equivalent, you will be taxed on the cash equivalent.

There is an exemption however, and that’s in the form of ultra-low emission vehicles. These are exempt from these changes, meaning you will be taxed in accordance to the BIK rate. Which is why we said ULEV’s would become more popular.

Ultimately, if you want to keep your company car tax as low as possible, you’ll want to be looking at ultra-low emission vehicles. For more information on company car tax bands you can read our article here. 

is a company car tax efficient?

Which ultra-low emission vehicles are best for company car tax?

The answer is pretty much all of them, as they will all ensure that you are exempt from the changes to the salary sacrifice scheme. However, some may make better company cars than others. So, we’re going to take a look at some of the ultra-low emission vehicles available. You should be aware that if you are looking at a ULEV, you will be looking at either fully electric cars or plug-in hybrids, which means you will have to get a charging point installed.

Volkswagen e-Golf

The Volkswagen Golf is a popular car as it is so the fully electric version is going to prove even more popular with those looking for an ultra-low emission vehicle. It has a good range as well at 118 miles.

Mercedes-Benz C350e

An executive badge but without the high company car tax? The Mercedes-Benz C350e isn’t quite as economical as the others, but it isn’t completely electric either which means that this is perfect for those range-anxious among us.

Volkswagen E-Golf - how far can an electric car travel in one charge

Nissan Leaf

The Nissan Leaf has become pretty popular and is a serious contender against the Toyota Prius. It has a range of up to 124 miles and is a great low-cost option. It’s quirky looks are also appealing.

Renault Zoe

The Renault Zoe is considerably cheaper than many ULEV’s and therefore making it a great car for company car tax as it will also have a low P11d value. It’s reliable, robust and is stylish meaning it’s not just the cheap and cheerful alternative.

BMW i3 hatchback

BMW i3

With a range of 100 miles, 186 with the petrol range extender, the BMW i3 is considerably less than the i8 but no less efficient. Admittedly, its looks are divisive and it’s more suited to the shorter work journeys but that’s not to say it’s not a viable option for a company car. It comes with a classy interior, the trademark BMW grille and the premium badge.

Audi A3 Sportback e-tron

The Audi A3 Sportback e-tron can either be a plug-in hybrid, 100% electric or run on petrol-power, the choice is yours. The best thing about this is is that it does not affect its efficiency. Audi’s have always been popular company cars, and with cars like the e-tron, they will only become more popular. The premium badge will appeal to many, and its looks aren’t quite as divisive as the i3’s.

So, ultra-low emission vehicles are, as it stands currently, exempt from company car tax. However, this will not be the case after April 2017, where they will be subject to company car tax. But, they are exempt from the salary sacrifice changes, meaning that should you invest in an ultra-low emission vehicle for your next company car, you will be saving a considerable amount of money in company car tax. Vehicles are being added all the time, so use our search function to see the latest choices.

What is an Ultra-Low Emission Vehicle?
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Holly Martin

Holly Martin

Content Co-ordinator at OSV Ltd
Holly enjoys: Reading, music and spending time with friends.

Within a week of Holly starting work at OSV she became an indispensable part of the marketing team. She's very intuitive and gets on with the whole office effortlessly.
Holly Martin

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