Experts anticipate that demand for fleet cars will rise considerably next year thanks to reduced benefit-in-kind (BIK) tax rates for plug-in vehicles.

2020 could see a spike in demand for fleet vehicles, according to Harvey Perkins, director of HRUX, who believes that existing rates of company car tax have been “too high” forcing employees to opt out of company car schemes.

For the 2019-20 financial year, company cars with CO2 emissions of 0-50 g/km are taxed at 16%, while those with emissions of 51-75 g/km are taxed at 19%.

However, from 2020-21, tax rates are set to fall for vehicles with emissions of 0-50 g/km to 2-14%, depending on the zero emission range. Meanwhile vehicles with emissions of 51-75 g/km will be taxed between 15-19%.

During a discussion at the Institute for Car Fleet Management (ICFM) conference, Mr Perkins said to delegates that the “rate of attrition of tax rates is too high” at the present time, with many employees viewing company cars as a “terrible deal” right now.

“Many drivers do not know what the cost of their company car will be until they have to order a new one. They then find out what the tax is and, as a result we are seeing more people opt out,” added Perkins.

Nevertheless, with plans afoot for BIK rates to be slashed from 16% on zero emission cars to just 2% in 2020-21, plug-in hybrid vehicles are set to become extremely popular among employees and employers alike.

Perkins believes that drivers will eventually “spend more money in Starbucks than in company car tax” for those driving fully electric company cars; something he believes is an “unbelievable deal” for employees.

Plug-in hybrid fleets with just a 40-mile range will be taxed at a rate of just 8%, giving employees and their employers an alternative until fully electric vehicles cement themselves within the mainstream.

However, Perkins anticipates the UK government’s coffers to experience a fall in tax receipts from fuel duty as a consequence of electric vehicle uptake.

“We will see some form of UK-wide road charging to recoup that money if it starts to float away with the transition to electric vehicles,” predicted Perkins.