March 21, 2014

New benefit-in-kind (BIK) rates have been announced by Chancellor George Osborne that will provide fleets choosing to buy low emission vehicles with little incentive to do so, the Chancellor confirmed in the Budget 2014, announced earlier this week.

The new changes mean that BIK rates will be increased by another 2 percentage points on fleet vehicles emitting over 75 g/km in 2017-2018 and 2018-2019, which will motivate companies to choose ultra-low emission vehicles. The changes will result in narrowed differentials between the lowest emitting vehicle bands. In 2017-1018 there will be a 4% differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands. In 2018-2019 the differential will decline to 3% and further to 2% in 2019-2020, as previously announced in Budget 2013.

The new BIK rates mean that low-emission vehicles, such as electric vehicles with emissions of up to 50 g/km, will see a series of increases: a 0% BIK tax in 2013-2014 and 2014-2015 to 5% in 2015-2016, 7% in 2016-2017, 9% in 2017-2018 and 13% in 2018-2019.

The electric vehicle market is still in stagnation and the current regime is not working, Gerry Keaney, chief executive of (BVRLA) said. Any benefits with respect to the costs the fleet industry would have received from the cancellation of the 3% diesel supplement in 2016 have been held back and by 2018-2019 fleet car drivers will contribute an extra £480 million in tax revenues to the HMRC , he added.