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Vehicle Tax Increase Set to Impact Petrol, Diesel, and Electric Car Owners
Motorists who own petrol, diesel, and electric vehicles will face a car tax hike effective today. Recent adjustments to Benefit-in-Kind (BiK) tax rates, declared by Chancellor Rachel Reeve during the autumn budget, are poised to elevate travel expenses for numerous individuals on UK roads. These changes will particularly affect company car users.
Changes to Benefit-in-Kind (BiK) Tax Explained
The BiK tax is levied on the value of a company car, factoring in elements such as its purchase cost and fuel type. Significant alterations to these rates are now coming into effect.
Impact on Electric Vehicle Tax
Owners of electric cars will experience a progressive increase in BiK rates. Starting from the current 2%, the rate will ascend to 9% by 2030, with interim increases to 4% in 2026 and 7% in 2028.
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- Road tax for electric vehicles registered on or after April 1st will be £10 for the initial year until 2029-30.
- Electric cars registered between April 1, 2017, and March 31, 2025, will be subject to the standard road tax rate of £195 from April 1st.
Petrol and Diesel Car Tax Implications
Compared to electric vehicles, petrol and diesel car owners will encounter steeper tax rates, commencing at 25%. Hybrid vehicle owners with CO2 emissions ranging from 1-50g/km will see their BiK rate surge to 18% by 2028 and 19% by 2030, a notable rise from the previous range of 5% to 17%.
Tax Rates Based on CO2 Emissions
For vehicles emitting between 51-54g/km of CO2, the BiK rate is projected to reach 20% by 2030. Vehicles with higher emissions will experience annual rate increases of 1%.
High Emission Vehicles and Diesel Surcharge
Cars producing CO2 emissions of 160g/km or greater, currently taxed at a BiK rate of 37%, will see this rate adjusted to 29% by 2030. Furthermore, diesel cars that do not adhere to emission standards will incur a 4% surcharge.
Impact on Company Car Drivers and Government Revenue
These tax modifications are anticipated to affect approximately 760,000 employees who utilise company cars, generating substantial revenue for the government in the coming years through increased vehicle taxation.
Pick-Up Truck Registration Surge Before Tax Changes
Recent data from the Society of Motor Manufacturers and Traders indicates a surge in new pick-up registrations, with over 8,000 vehicles registered last month. Vehicles acquired from Sunday, April 6th, are now subject to company car tax.
Industry Expert Comments on Vehicle Tax Adjustments
Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), commented that the notable rise in pick-up registrations was expected. She highlighted March as the last opportunity for consumers to purchase a pick-up and still benefit from the more favourable commercial Benefit-in-Kind taxation.