The 2016/17 BIK and FBIK changes just cost you a holiday!

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Benefit in Kind and Fuel Benefit in Kind charges

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
 Expected 2016 value*:
    • Benefit-in-kind: £5111.40
    • Fuel benefit-in-kind: £4641
    • Total taxable benefit: £9752.40
    • Cost to a 40% taxpayer: £3900.96
 Actual 2016 value:
    • Benefit-in-kind: £5841.60
    • Fuel benefit-in-kind: £5280
    • Total taxable benefit: £11121.60
    • Cost to a 40% taxpayer: £4448.64
What could that £550 have bought you?
    • 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
Leave a comment below on what would you have spent the £550 on!