Car BIK and VED rates increase for 2020
The government will be changing its Benefit In Kind (BIK) tax rates for company car drivers from 6th April 2020. The new rates show a clear bias toward all-electric and efficient hybrid models, especially plug-ins.
What are the changes?
There will be higher tax rates for more polluting vehicles and an attractive 0% BIK tax for those with zero CO2 emissions. In addition, it also splits models in the 1-50g/km CO2 emissions band by electric-only range.
These rates apply to all types of car, although diesels must be RDE2 compliant; those not meeting the RDE2 testing standard will be subject to an additional 4% tax.
Over the next two years, the BIK rate for zero emissions vehicles will increase by 1% each year.
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What is the impact?
While there has been a downturn in colleagues opting for company cars over recent years due to the higher BIK rates for petrol and diesel models, the number of new electric cars available - many with decent ranges - and their lower tax rates are expected to boost company car uptake.
What about VED rates?
VED rates typically increase over time - to keep up with inflation - but for 2020, they will stay the same as 2019.
But there are rumours of VED increases?
The rates are staying put but there have been some significant changes in the industry which have had an effect on some vehicles.
Primarily, increases will be due to the way emissions are determined for each vehicle. The newer WLTP method produces more accurate emissions data - with the added benefit of providing more realistic fuel consumption figures for consumers. In most cases, the new CO2 figures are higher than under the previous tests and some models will now fall into higher VED bands.
What changes are on the horizon?
With the government’s plan to stop the sales of petrol, diesel and hybrid cars by 2035, we can expect further changes to taxation in the coming years to encourage customers to choose electric vehicles. The government has already stated that it will consult on “moving towards a more dynamic approach to VED which recognises smaller changes in CO2 emissions”.
You can find the latest VED rates published by the government here.