NEW BENEFIT IN KIND RATES PUBLISHED
Posted on 26th July 2019 at 09:09
In its long awaited response to the review of company car tax, HM Treasury announced it was disregarding the previously published BIK rates for 2020/21 for vehicles registered after 6th April 2020. This is in an effort to mitigate more accurate vehicle CO2 emissions shown in the Worldwide harmonised Light vehicle Test Procedure (WLTP).
Instead two new BIK tables for company car drivers have been revealed, one for those driving a company car registered after 6th April 2020 based on WLTP CO2 figures, and one for those driving a company car registered before the same date, based on NEDC-correlated CO2 figures.
Despite a new rate of 0% for pure electric vehicles (EVs) from April 2020, some company car drivers could face a year on year increase of more than 10%, whilst others could be paying hundreds of pounds more to drive exactly the same company car as a colleague.
Under the HM Treasury’s original rates, in 2020/21 the BIK percentage would have increased from 29% to 30% equating to a new annual charge of £1,538.40 and a 3.5% year on year rise. The new BIK table for cars registered before 6th April 2020 does maintain the 30% rate for the next three tax years, up to and including 2022/23.
Furthermore, two drivers could have exactly the same model registered days apart, but one would pay £102 more than their colleague during the same tax year (2020/21) because of the different tax rates and CO2 emissions calculations the Government intends to implement. The difference would also grow year on year by £153 in 2021/22 and by more than £200 the following year.
The new BIK table for cars registered before 6th April 2020 also maintains the 32% rate for the next three tax years, up to and including 2022/23. However if the vehicle is replaced with exactly the same model next April it will attract a BIK rate of 34% leaving the driver facing an increase of almost 10% or more than £430 year on year.
However it will be plug in vehicle drivers that will enjoy the greatest savings under the new company car tax regime due to the new 0% tax rate for pure electric EVs in 2020/21.
EV company car drivers were already expected to see a much reduced rate of 2% for 2020/21 and the 0% BIK tax rate will now mean they pay no company car tax at all for 12 months from next April. The rate for zero emission cars will then increases to 1% in 2021/22 and 2% in 2022/23.
If you require any further information regarding the new Benefit In Kind rates please do not hesitate to contact us.
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