Benefit in Kind BIK for Electric Vehicles

Ok, so the world is falling apart, and no one is driving their cars at the moment, they are even less likely to be buying a new car, and all the motor manufacturers have mothballed their factories.   But if you are a company car driver, April is approaching, and if you are considering a new car, it should be electric.

So here is some info on the upcoming changes to company car tax, also known as Benefit In-Kind

In April 2020, the UK Government will switch its CO2 figures used to calculate tax rates from the existing NEDC data set to WLTP. As such, there will be a changeover period where two different sets of BIK rates will be used – one for vehicles registered before 6th April 2020, and one for those registered after that date.

Company car tax rates are designed to encourage company car drivers to choose cars with lower levels of CO2 and (from April 2018) NOx emissions; incentives are offered both to the company and to the recipient of the vehicle to select low emission vehicles.

Under the current system, the amount of Tax paid is based on the CO2 of the vehicle and the value of the vehicle often called P11d.  The Tax known as BIK is then taken from payroll according to the tax bracket of the employee

Company car tax payable by an employee is based on the vehicle’s P11D value multiplied by the appropriate BIK rate (determined by the car’s CO2 and fuel type) and the employee’s income tax rate (basic rate of 20%, higher rate of 40% or additional rate of 45%).

Company car BIK rates 2019 – 2022

Current company car BIK rates start at 22% for petrol and RDE2 compliant diesel cars, the rate increase in 1% increments as CO2 bands rise, up to a maximum of 37%. From 06 April 2018, to account for the greater level of NOx emissions, a 4% diesel car tax supplement is payable which applies for non-RDE2 compliant diesel, the vast majority of current diesel models.

All hybrid cars receive a reduced BIK rate as a result of their lower CO2 emissions, which tends to reduce their BIK rates by at least 2%. Note that for diesel hybrids, the 4% diesel surcharge does not apply, since they are not classed as diesel-powered cars, but alternatively fuelled vehicles for tax purposes.

Electric vehicles are also rewarded with lower BIK rates with battery-electric cars BIK-rated at 16% for FY 2019/20, reducing to 0% during 2020/21, and then increasing to 1% and 2% for years 2021/22 and 2022/23 respectively.

From April 2020, new BIK bands come into force for plug-in models with CO2 emissions of 1-50 g/km, with the new BIK levels dependent on the official electric-only range in miles. Those with a range in excess of 130 miles are classed as pure-electric models for the purposes of BIK ratings (at 0%) , while those plug-in models with a range of fewer than 30 miles will be rated at 14%.

The table below shows how the percentage of BIK rates vary with vehicle CO2 and electric-only range. The table represents petrol, diesel and electric related BIK rates for 2019-2023. Note that the below table makes use of current NEDC-derived CO2 data, and for cars set to be registered before April 2020. See separate table for WLTP-derived CO2 BIK rates, for models registered from April 2020.

** Rate applies to diesel vehicles not meeting the RDE2 standard. For diesel-hybrids, the Non-RDE2 4% diesel surcharge does not apply. All BIK rates apply to cars registered since 1998. Source: HMRC 2019.

4% supplement for non-RDE2 compliant diesels

From April 2018, HMRC levied a 4% diesel supplement over petrol models to account for greater levels of NOx emissions for the most current diesel cars. The supplement applies to diesel cars not compliant with the Real Driving Emissions Step 2 (RDE2) test, which confirms that real-world emissions are close to, or better than, the Euro 6 emissions standards for NOx. Thanks to nextgreencar.com for providing some great detail around this.

WLTP Company car BIK rates 2020 – 2023

** Rate applies to diesel vehicles not meeting the RDE2 standard. For diesel-hybrids, the Non-RDE2 4% diesel surcharge does not apply. All BIK rates will apply to cars registered from April 2020. Source: HMRC 2019.

About NEDC and WLTP The motor industry loves a good acronym.  So when the government decided to modernise the ‘New European Driving Cycle’, or NEDC, which is the OLD emissions testing procedure, they had a great opportunity to come up with something a bit more catchy!…  They failed… miserably.  And so the ‘Worldwide Harmonised Light Vehicle Test Procedure’, or WLTP, was born.  I know right?!

Much like the NEDC, the WLTP is a test used to measure fuel consumption and CO2 emissions.  And that’s pretty much where the similarity ends.  NEDC was designed in the 1980s.  And much like the mullet, it’s no longer relevant… or cool!  It determines test values based on a THEORETICAL driving profile, which is essentially guesswork.  Evolutions in technology and driving conditions, means NEDC has become outdated.  This prompted the EU into a rethink

That rethink ended up being the, not so catchy, WLTP, which was developed using real-driving data, gathered from around the world.  It, therefore, better represents everyday driving profiles and is a little more… ‘dynamic’

But what do we mean by ‘dynamic’?  Well, the test itself is a 30-minute, 23km lab-based driving cycle, divided into four parts.  These are 52% urban and 48% NON-urban, and also have different average speeds… low, medium, high and, wait for it… EXTRA high.  Each part contains a variety of driving phases, stops, acceleration and braking

For a certain car type, each powertrain configuration is tested, for the car’s MOST and LEAST economical version.  Tests are also undertaken for CO2 emissions and economy with different combinations of optional equipment.  So things like larger wheels, heated seats or air conditioning are taken into consideration

If you’re wondering just how accurate a driving test in a laboratory can be, then the boffins who came up with WLTP are one step ahead of you.  But that’s probably normal.  They are, after all, boffins.  Whatever that means.  Anyway, I digress.  Said “boffins” came up with another test that they feel perfectly compliments WLTP.  And guess what… it’s another acronym

RDE… Real Driving Emissions puts each car through a real-world scenario, under actual driving conditions.  RDE measures pollutants, such as NOx AND particle numbers.  In the same, ‘let’s not keep things simple’ vein as WLTP, it ensures that cars are driven in urban, rural and motorway situations, both uphill and downhill… and at different altitudes… obviously