New BiK car tax changes today will leave drivers in ‘sticky situations’ as prices increase
Martin Lewis gives money-saving advice on VED car tax
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From today, April 6, company car tax rates will be changing with drivers seeing costs increase for almost any bracket of vehicle. Benefit-in-Kind (BiK) tax rates are changing, rising from one percent to two percent for fully electric vehicles and most petrol and diesel vehicles.
Following this upcoming tax year, the BiK rate will remain at two percent until 2025, although many drivers and experts believe more could be done.
Some businesses have said it is hard to plan for the future when they don’t know if prices will drastically change, especially if they lease cars for three or more years.
The company scheme operates as a “salary sacrifice” employee benefit where an employee gives up a small part of their salary in exchange for a brand new, fully electric car.
The salary sacrifice is deducted from their gross salary so the employee will pay less income tax and National Insurance.
The employer will reduce their bill for national insurance contributions.
Non-monetary benefits provided by an employer are required to be taxed, which is the BiK tax.
Louis Rix, COO and co-founder of car finance platform CarFinance 247, warned that the new car tax changes will have big impacts on drivers.
He told Express.co.uk: “Vehicle Excise Duty rate increases are the latest sting that consumers are being hit with this year; drivers are likely to see between £10 and £30 annual increases as a result of the change.
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“Despite the fuel duty cut announced during Chancellor Rishi Sunak’s Spring Statement, prices are still sky-high and some are having to prioritise heating their homes over using their cars.
“Once again there’s little support on offer from the Government.
“With the amount of price hikes being introduced across the automotive sector, some political intervention will be necessary to prevent those already financially struggling from being plunged into poverty.
“Worse yet, Benefit in Kind tax increases will leave businesses in sticky situations.
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