What are the April Road Tax and BIK for Company Car Tax Increases?

This April, the government is making changes to the way that Vehicle Excise Duty (commonly known as “road tax” or “car tax”) and Benefit-in-Kind (“BIK”) for Company Car Tax is calculated. 

While these taxes have often fluctuated over the years, the 2020 changes will present drivers with some of the biggest cost increases.

• Vehicle Excise Duty will increase from April 1st 2020.
• BIK on petrol and diesel vehicles will increase from 6th April 2020.
• BIK on hybrid and electric cars is also changing from 6th April 2020 (you can read more about this here).

These changes are being driven by an updated emission test to better understand fuel consumption, CO2 emissions and pollutant emissions of vehicles. The test is called WLTP.

In this article, we’ll take a close look at WLTP and how it might impact customers who are considering leasing a vehicle this year.

 

What does WLTP mean?

WLTP stands for Worldwide Harmonised Light Vehicle Test. It’s a test that’s used to measure fuel consumption, CO2 emissions, and pollutant emissions from passenger cars. It replaces the old NEDC (New European Driving Cycle) test, which was designed in the 1980s and is now considered outdated.

From April 2020, WLTP will replace NEDC as the means of establishing the official fuel consumption and CO2 emissions of new vehicles. The switch from NEDC to WLTP has been in progress since September 2017.

 

How is WLTP Different from NEDC?

The NEDC used test values based on a theoretical driving-profile. The EU automotive industry recognised a lack of robustness in this method, and contributed to the development of a new test, the WLTP.

Where the WLTP test differs is that it uses real-driving data, which has been gathered from around the world. It better represents real driving-profiles.

 

How Does This Affect Me?

The new WLTP data provides us with CO2 values more accurately than the old NEDC test. This affects:

• Vehicle Excise Duty (VED)/Road Fund Licence (RFL)
• BIK for Company Car Tax.

All customers who lease a new car after 1st April 2020 need to be aware of the following:

• For vehicles registered on or after 1st April 2020, road tax costs will be based on the new WLTP CO2 values and not the outdated NEDC values. This may change the monthly rental cost.
• For vehicles registered on or before the 5th April 2020, road tax costs won’t be affected - this will be based on the current NEDC values.
• For vehicles registered on or after the 6th April 2020, BIK will be based on the new WLTP CO2 values.
• For vehicles registered on or before the 5th April 2020, BIK won’t be affected - this will be based on the current NEDC values.

You should be aware that if you add options to your personal or business vehicle lease, these could impact the CO2 emissions and therefore the VED or BIK value may change.

It may not be possible to register some vehicles on or between the 1st and 5th April 2020. This may cause a slight delay to the registration and delivery of your vehicle. 

 

How Much More Will I Have to Pay?

The government will be announcing the increased VED and BIK charges as part of the UK Budget on 11th March. Until this happens, information on both taxes is based on current values and so will change.

We will update this page with specific information once the Chancellor has provided more clarity.

 

This content is for information purposes only and does not constitute legal or financial advice.