New company car BIK tax rates explained

BIK-Tax-Calc

Last week the government published the draft legislation which outlines the company car benefit in kind appropriate percentages for the coming years – announcing that company car drivers with zero emission vehicles will pay no benefit-in-kind (BIK) tax in 2020/21.
 
Importantly there are three full years of BIK rates providing clarity for employees and fleet decision makers as well as the government recognising the role the company car market has to play in the transition to zero emission technology.
 
In the announcement the government has amended its previously published BIK rates for 2020/21 and produced two new tables for company car drivers;

  • Cars registered before April 6, 2020 on the current NEDC or NEDC correlated CO2
    • Zero emission EVs reduced to 0% in 2020/21 and increasing by 1% each year until 2022/23
    • Vehicles with a CO2 greater than 0 g/km, see the 2020/21 rate previously provided remain and then frozen until 2022/23
  • Cars registered after April 6, 2020
    • All vehicles see a 2% reduction to the appropriate percentage previously published for 2020/21
    • Vehicles then see an annual increase of 1% until 2022/23

This creates parity in the two tables in 2022/23 and the return to one tax table again.

The 4% diesel surcharge remains, unless cars meet the Real Driving Emissions 2 (RDE2) standard which makes them exempt. RDE2 compliance is mandatory for all vehicles on sale from January 2021, all new models introduced from January 2020 and already available on derivatives of some key fleet vehicles – the new Mercedes A-Class, new BMW 1 Series and Jaguar XE and XF.

So what does this mean for employee BIK, below are some example vehicles:

The electric vehicle
AUDI E-TRON ESTATE 300kW 55 Quattro 95kWh 5dr Auto
CO2 – 0 g/km (Same for NEDC/WLPT)
P11d – £71505

Appropriate
percentage –
registered
pre
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax payer)
Appropriate
percentage –
registered
post
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax Payer)
2020/210£0 (£0)0£0
2021/221£715 (£24)1£715 (£24)
2022/232£1,430 (£48)1£1,430 (£48)

A no brainer where adoption of pure EV is suitable and the company is willing to pay for the vehicle. On the whole companies should expect more demand from employees for EV and ULEVs.
 
The RDE2 standard family hatchback
MERCEDES-BENZ A CLASS DIESEL HATCHBACK A200d Sport 5dr Auto
NEDC CO2 – 110 g/km – RDE2
WLTP CO2 – 125 g/km – RDE2
P11d – £28,685

Appropriate
percentage –
registered
pre
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax payer)
Appropriate
percentage –
registered
post
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax Payer)
2020/2127£7,745 (£129)28£8,082 (£135)
2021/2227£7,745 (£129)29£8,319 (£139)
2022/2327£7,745 (£129)30£8,606 (£143)

For basic rate tax payers – which from April 2019 is employees earning up to £50,000 – there is no significant jump in BIK depending on when you renew or year on year and the value of the company car as a benefit remains obvious to see. RDE2 compliance and avoiding the diesel surcharge certainly helps.

Old faithful
BMW 3 SERIES DIESEL SALOON 320d M Sport 4dr Step Auto
NEDC CO2 – 113 g/km – non-RDE2
WLTP CO2 – 140 g/km – non-RDE2
P11d – £38,050

Appropriate
percentage –
registered
pre
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax payer)
Appropriate
percentage –
registered
post
6 April 2020
Value of Benefit
(Monthly BIK
40% Tax Payer)
2020/2131£11,796 (£393)35£13,318 (£444)
2021/2231£11,796 (£393)36£13,968 (£456)
2022/2331£11,796 (£393)37£14,079 (£469)

Unfortunately without RDE2 compliance and the increase in CO2 – as a result of WLTP – for high earning traditional company car drivers it is an effective increase of £61 per month over three years on cars registered after April 2020. If EVs oh PHEVs are not suitable for these employees you can consider an alternative structure such as maximising cash allowances, approved mileage allowance payments (AMAPs) or mileage allowance relief (MAR).
 
The ‘one size fits all’ approach to fleet is a thing of the past and the draft legislation only confirms this. Speak to your JCT600 VLS Account Manager to discuss the suitability of zero emission vehicles on your fleet and how you can structure your policy and choice lists to take advantage of the changes for your company and your employees.

Here are some handy links to help you further:

In the meantime if you have any questions, please don’t hesitate to get in touch with us and we will be happy to assist.