BIK Tax Rates Provide a Boost for Salary Sacrifice Schemes
The latest announcement on company car Benefit-in-Kind (BIK) tax rates is welcome news for employers and employees considering electric vehicles through Salary Sacrifice schemes, providing greater certainty over future costs and potentially encouraging drivers to move forward with vehicle orders.
Following the latest Budget, the Government has published company car tax rates extending through to the 2030/31 tax year. Importantly, the confirmed rates indicate only a modest increase in BIK taxation for fully electric company cars, with the rate reaching 10% in 2030/31.
The announcement provides much-needed clarity for businesses, salary sacrifice providers and employees who have been waiting for greater certainty before committing to a new vehicle.
Greater certainty for electric vehicle drivers
One of the biggest attractions of electric vehicles through company car and Salary Sacrifice schemes has been their favourable Benefit-in-Kind tax treatment. For a better understanding of how company car taxation works, read our Company Car BIK Guide.
Despite this advantage, uncertainty surrounding future BIK rates has led some employees to delay placing orders, concerned that changes to taxation could affect the overall cost of their vehicle during the agreement.
The publication of rates covering the next five tax years provides greater reassurance. Employees considering a new electric vehicle can now make more informed decisions, with a clearer understanding of how their company car tax liability is expected to change over a typical three- or four-year agreement.
With the BIK rate for fully electric cars increasing by just one percentage point to 10% in 2030/31, electric vehicles continue to benefit from a comparatively favourable tax position.
For further information on how company car taxation is calculated, visit HMRC's guidance on tax on company cars.
An opportunity for employers considering Salary Sacrifice
The announcement is also significant for employers who have been considering introducing a Salary Sacrifice scheme but have held back while waiting for greater clarity on future taxation.
For employers and employees looking to understand how these schemes work, our guide to Salary Sacrifice Car Schemes explains the benefits, how the arrangements operate and what to consider before getting started.
A Salary Sacrifice scheme allows employees to access a new vehicle through an agreed reduction in their gross salary, with the associated company car Benefit-in-Kind tax applying where relevant.
For employees, this can provide access to a new electric vehicle with potential savings compared with traditional personal leasing arrangements. For employers, it offers an additional employee benefit that can support recruitment, retention and the transition towards more sustainable motoring.
Greater certainty over future BIK rates should help employers revisit proposals that may have been put on hold and give employees greater confidence when considering their next vehicle.
Electric vehicles remain an attractive company car option
Despite the gradual increase in BIK taxation over the coming years, fully electric vehicles continue to benefit from a favourable company car tax position compared with many petrol and diesel alternatives.
For businesses looking to reduce their fleet emissions and employees interested in making the switch to electric motoring, Salary Sacrifice remains an attractive option worth exploring.
The additional clarity provided by the latest Budget announcement should help remove some of the uncertainty that has been affecting purchasing decisions and allow employers and employees to plan with greater confidence.
How Yorkshire Fleet can help
At Yorkshire Fleet, we help businesses explore and implement vehicle leasing and Salary Sacrifice solutions that work for both employers and their employees.
Whether you're considering introducing a new Salary Sacrifice scheme or reviewing an existing arrangement, our team can help you understand the options, assess the potential benefits and find a solution that suits your business.
Thinking about introducing Salary Sacrifice at your workplace?
Get in touch with Yorkshire Fleet to discuss how a Salary Sacrifice scheme could benefit your business and your employees.
Contact Yorkshire Fleet to find out more.
