The Worldwide Harmonised Light Vehicle Test Procedure, or WLTP, is a new test procedure which has been defined by the government for the measurement of fuel economy and CO2 emissions data. All vehicles registered since September 2017 will have been tested under this regime.
WLTP fuel economy figures have been available since the beginning of 2019, but from April 6th this year the new CO2 figures will also come into effect for all passenger cars registered, replacing the previous NEDC Correlated values. The new WLTP legislation will impact whole-life cost calculations, employer’s Class 1A National Insurance Contributions, first year road fund tax (RFL), and employees' benefit-in-kind (BiK) tax. With this in mind, it is worth considering what the financial implications could be for your business and its drivers.
We don’t currently have data for every vehicle model available but, on average, we expect the WLTP CO2 value to increase by 25g/km over the previous value, which could increase the RFL by up to three bands. The increase in some cases could be up to £700 at registration, though most changes will be less significant.
For BiK purposes, the government has introduced a secondary data table for vehicles registered from 6th April 2020 which reduces the tax implications by 2% for the majority of CO2 bandings. This is intended to compensate for the average increase in CO2 values, so that company car drivers are not adversely impacted, but it might not be sufficient to offset the impact in every case.
There is a further impact for vehicles where the CO2 value is taken over the 110g/km threshold which will mean they become subject to the 15% lease rental restriction. In this instance, businesses will only be able to deduct 85% of the rental payments against their taxable profits.
All of the above are considerations for your business. As factory order lead times are already taking us past 6th April for some manufacturers, it might be worth reviewing vehicles which are available from current stock if you have an immediate requirement for new vehicles. Creating fleet policies will also require some extra thought and it could be a financial benefit to both your business and its drivers to move to lower emission vehicles, such as hybrid or electric cars.
At TCH Leasing, we're here to help you understand the impact of WLTP and how it will affect your business. Our specialist teams are fully equipped and informed to provide you with the up-to-date information that you need to quickly explore your options and come to the best decision for your fleet.
If you have any questions or want to discuss the WLTP regulations before April, simply get in touch.