8 April 2020

WLTP emissions test increases UK company car tax

We look at how the introduction of the new WLTP test in April affects company car tax.

Car buyers faced higher running costs following the introduction of new WLTP CO2 emissions test figures from 1st April.

The new test applies to vehicles registered from April 1st 2020 and, on average, leads to a 20% increase in reported CO2 emissions.

Vehicle Excise Duty (VED) increases by around £300 per year for the average car, according to Cap HPI.

Company car drivers are also affected, as CO2 emissions directly affect benefit in kind (BIK) rates.

Average CO2 values increased by 26 grams, from 135 under NEDC (the previous system) to 161 under WLTP.

Jonathan Clay, Head of Vehicle Identification at Cap HPI, said: ‘The combination of the introduction of WLTP and a new tax regime aimed at encouraging private drivers and fleets to make greener motoring choices has driven up costs across the board. But it’s also clear that some sectors are more affected than others, which will undoubtedly drive a change in the shape of the UK car parc.’

WLTP came into force in the UK on 1st April for VED and 6th April 2020 for BIK. Vehicles registered after this date will be taxed using the new WLTP CO2 emissions values. The values will relate to the specific configuration of an individual vehicle, taking optional equipment such as roof racks and larger wheels into account for the first time.

The new test was designed to provide more accurate real world figures. Initially, only the fuel economy results were published, to provide better clarity for buyers, but now the full test results are being used for tax purposes.

Cap HPI says large executive vehicles will see the most substantial increase in VED at £546, followed by executive cars at £459 and MPVs at £455. City cars and supercars saw the smallest increases with £52 and £40 respectively.

On average, diesel vehicles saw CO2 increase by 30 grams while petrol hybrid vehicles rose by 29.3 grams. Diesel plug-in hybrids saw CO2 decrease by 1.9 grams on average.

The diesel sector saw the largest increase in VED of £423 on average, followed by petrol at £232 and petrol hybrid at £180. Petrol plug-in hybrid vehicles only saw a rise of £6 and diesel plug-in hybrid vehicles saw no increase.

Electric vehicles provide the largest BIK savings, with the Porsche Taycan saving drivers more than £16,000 and the Tesla Model 3 £8,000. The Kia e-Niro, Hyundai Kona and Nissan Leaf all offer savings of around £6,000.