Benefit-in-Kind (BIK Update April 2024 to 2028
The structure of company car tax, known as Benefit-in-Kind (BIK) rates, is set for significant changes from April 2024 to 2028, reflecting the UK government's continued push towards electrification of the vehicle fleet and environmental sustainability.
These changes are intricately designed to incentivize both the adoption of electric vehicles (EVs) and the use of vehicles with lower CO2 emissions, aligning with broader climate change targets.
For the period from April 2024 to April 2028, the BIK rates for fully electric vehicles (EVs) will start at a low 2% in 2023-24 and are scheduled to incrementally increase each year, reaching 5% by 2027-28. This gradual increase underlines the government's strategy to maintain the attractiveness of EVs for company car drivers while starting to normalize the tax treatment of electric and internal combustion engine vehicles as the market for EVs matures.
Vehicles with CO2 emissions between 0.1 to 50 g/km will see varying rates based on their electric range.
For instance, those with an electric range of over 130 miles will enjoy the same favourable rates as fully electric vehicles, starting at 2% in 2023-24 and increasing to 5% by 2027-28.
On the other end, vehicles in the same CO2 bracket but with an electric range of less than 30 miles will face a starting rate of 14% in 2023-24, escalating to 17% by 2027-28. This tiered approach serves to emphasise the importance of electric range in reducing environmental impact.
For vehicles with CO2 emissions above 50 g/km, the BIK rates will start at 15% for emissions of 51-54 g/km, climbing progressively with each increase in emissions bracket, up to a ceiling of 37% for vehicles emitting 170 g/km or more, a rate that will remain static from 160 g/km and above, from 2024-25 onwards.
This updated BIK rate structure clearly signals the government's intent to leverage fiscal policy as a tool for environmental policy, encouraging businesses and individuals to consider the environmental impact of their vehicle choices. As the rates progressively increase for vehicles with higher emissions and lower electric ranges, the message is clear: the future of company cars is electric, and the sooner businesses adapt, the greater the benefits they will reap, both financially and in terms of their environmental footprint.