In November 2015 the government’s decision to scrap the merger of the petrol and diesel BIK tax bands (also known as company car tax) was widely reported. The 3% surcharge was set to disappear in April 2016, but Chancellor George Osborne said he had decided to postpone the move for a further five years “in light of the slower-than-expected introduction of more rigorous EU emissions testing". The quote suggests the U-turn was likely influenced by the entirely unrelated Volkswagen emission scandal. (But that’s another story!) According to the Government’s policy costings document, the U-turn is expected to raise an additional £1.36bn over the next five years for the Treasury– £280m of which will be raised in the next financial year, 2016/2017.
With the new financial year looming, these proposed increases made me think- "What affect do the changes have on average driver on a fuel benefit system?"
Using the popular company car, the Ford Mondeo 2.0 TDCi Zetec 5dr (124.0g/km Co2 and a list price of £24,340). Some simple number crunching shows the expected total taxable benefit expected pre-change* was £9752.40, equating in real cash terms to a 40% taxpayer as £3900.96. With the incoming changes now in force as of April 2016, the total taxable benefit is now £11121.60 or for a 40% taxpayer £4448.64 - A staggering £547.68 higher! This equates to a 14% increase on the year-to-year cost to an employee when using this company car with fuel benefit.
*(Before scraping the proposed tax band merger and increasing the car fuel charge benefit multiplier).2015 value:
- Benefit-in-kind: £5354.80
- Fuel benefit-in-kind: £4862
- Total taxable benefit: £10,216.80
- Cost to a 40% taxpayer: £4086.72
- Benefit-in-kind: £5111.40
- Fuel benefit-in-kind: £4641
- Total taxable benefit: £9752.40
- Cost to a 40% taxpayer: £3900.96
- Benefit-in-kind: £5841.60
- Fuel benefit-in-kind: £5280
- Total taxable benefit: £11121.60
- Cost to a 40% taxpayer: £4448.64
- 5000 miles of diesel (Using the 11p per mile advisory fuel rate on this car).
- The new iPad pro
- A 7-night all-inclusive holiday for two to Turkey