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BiK Rates Company Car Tax

BiK rises necessitate back-to-basics approach for fleets

So says Days Contract Hire, adding that the BiK changes announced in the recent Budget are sending confusing signals to fleet decision-makers and drivers, with drivers of higher-emission cars (76g/km and above) facing the lowest tax increases over the next five years.

While Chancellor of the Exchequer George Osborne said in his Budget statement that he was using the company car tax system to ‘increase the discount’ for ultra low emission vehicles – defined by the Government as models with CO2 emissions of 75g/km and below – the reality is that BiK rates for those vehicles will increase at a significantly faster rate over the next five years than for higher emission cars (see table below).

Although the changes see a higher threshold differential maintained between the 0-50 and 51-75g/km CO2 bands and between the 51-75 and 76-94g/km bands than was previously announced, Days Contract Hire said the reality is that in choosing such models drivers will face massive increases in their tax bills over the next few years.

Director Aled Williams commented: ‘The Government is sending the fleet industry confusing signals. While it wants businesses and company car drivers to select ultra low emission models they will be subject to the highest tax increases over the next five years.

‘Simultaneously, the Government’s previous decision to remove the 3% diesel surcharge was welcomed, but it is the increase in the use of diesel-engined vehicles that is at the route of European Union and ministerial concerns over air quality standards. As a result, we can expect to see more towns and cities introducing ultra low emission vehicle zones such as the one being planned by Transport for London for 2020.’

Williams continued: ‘We will continue to advise clients to base company car choice lists on vehicle whole-life costs. Even with BiK tax rates to increase significantly for ultra low emission cars over the next five years, we would anticipate tax rises to be at least partially offset by fuel bill savings – the lower a car’s CO2 figure the better its fuel economy.

‘Nevertheless, ultra low emission cars, including the new breed of pure electric and range-extender models, typically have significantly higher list prices than similarly sized petrol and diesel-engined models.

‘Therefore, we will be working with our customers to help them compile choice lists that deliver to drivers the best possible selection of tax competitive vehicles, while continuing to ensure they are fit for purpose and taking in to account whole-life costs.’

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.