- Zero-percent BIK tax level has now disappeared
- Lowest-possible BIK tax is now 10 percent for diesel cars
- Fuel duty tax freeze remains
It’s only days until the new financial year begins and changes come into force that affect company car drivers and the amount of tax they’ll have to pay. These changes were announced in the 2015 Budget, with this year’s announcement leaving tax alone to focus on other ways of recouping cash for the country’s coffers.
The resulting new tax rates will help the Government’s drive towards lower CO2 emissions for all cars, so it comes as no surprise that those with tailpipe outputs of zero or comparatively low carbon dioxide levels will cost you the least to run. The official name for these tax bands is Ultra Low Emissions Vehicles – or ULEVs.
Your benefit-in-kind (BIK) taxation will still be based on a percentage of the car’s list price depending on the level of CO2 the car emits in that particular specification.
This percentage is calculated using set thresholds for CO2 output, with these rising by two percent across the board for the 2016/17 tax year.
The zero-percent level has now disappeared, and the lowest-possible BIK tax for ULEVs is now seven percent, with diesel cars at 10 percent due to the continuation of the three percent fuel duty surcharge. This tax level is set to rise slower than higher bands from 2019/20, the latter increasing by three percent across the board.
The new 51-75g/km band moves skywards from nine percent to 11, and ditto the 76-94g/km threshold, rising from 13 percent to 16. The rest of the BIK bands see a two-percent hike up to a maximum of 37 percent for the most polluting cars.
In rosier news, for drivers who pay their own fuel for private use, the fuel duty tax freeze remains in place, so at least trips to the pump shouldn’t get much more expensive.
How will it affect me?
To illustrate how the changes are likely to affect tax bills, we’ve picked three popular company cars to investigate their tax bills for the upcoming years.
Version: 1.5 dCi Tekna 5d
CO2 output: 103g/km
Tax* for 2016/17: £87
Tax* for 2017/18: £96
Tax* for 2018/19: £105
Claimed fuel economy: 70mpg
Version: 1.0 EcoBoost Zetec
CO2 output: 105g/km
Tax* for 2016/17: £56
Tax* for 2017/18: £62
Tax* for 2018/19: £68
Claimed fuel economy: 61mpg
CO2 output: 87/gkm
Tax* for 2016/17: £47
Tax* for 2017/18: £52
Tax* for 2018/19: £58
Claimed fuel economy: 85mpg
Version: 2.0 PHEV GX3h (09/15-) 5d Auto
CO2 output: 42g/km
Tax for 2016/17: £40
Tax for 2017/18: £51
Tax for 2018/19: £74
Claimed fuel economy: 148mpg
As you can see, the cars that suffer the most with the changes are the lower-emitting models, like the Mitsubishi Outlander plug-in hybrid. That’s no surprise really – these cars are more popular than ever and are selling in record numbers, which is why tax changes were necessary in the first place.
It’s more important than ever to check what the BIK will cost you for the whole time you’re expecting to have the car, though. The thresholds are constantly creeping up and you wouldn’t want to be lumbered with an unexpected bill.
Find out exactly how much you’ll have to pay in our Company Car Tax Explained article by clicking here.
For more on the Budget 2016 read our "everything you need to know" article.
*Company car tax is calculated per month, using the lower 20 percent pay scale, assuming no optional extras, and with P11D values correct at time of publication. Calculate your own tax liability using our company car tax calculator by clicking here.