April car tax changes will be a ‘relatively negligible’ rise warns experts

Martin Lewis gives money-saving advice on VED car tax

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Car tax updates will see Benefit in Kind (BiK) rates rise from zero percent to 1 percent for those who own an electric company car. The Benefit in Kind rates were dropped from 16 percent to zero last year to encourage road users to take up zero-emissions vehicles.

However, the tax was always set to rise in April 2021 to one percent before rising to two percent next year.

There were rumours Rishi Sunak would freeze the zero percent charge for a further year in his Budget statement about this plan was not taken.

It means drivers will pay higher monthly charges on their company car in a major setback for road users.

Despite the updates, Fiona Howarth, CEO of Octopus Electric Vehicles has downplayed the new scheme.

She warns the changes will be “negligible” for those with a zero-emissions electric vehicle and claimed drivers would still make heavy savings compared to running a petrol vehicle.

Data from Octopus Electric Vehicle shows Benefit in Kind payments for a BMW petrol model will be £345 per month for a 40 percent taxpayer from April.

In comparison, those renting Tesla on 40 percent tax will pay just £14 per month in a major saving,

Speaking to Express.co.uk, she said: “I don’t think people will necessarily know it was ever at 16 percent.

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“But I think the one percent is so low it’s relatively negligible. For a Model 3, one percent will be £14 per month, the equivalent on a BMW 3 Series is now £344 per month.

“So £14 per month is so much less. And switching from petrol and diesel to electricity, there saving about 90 percent on their fuel costs if they can charge from home.

And so actually the saving they are making between petrol and diesel and electricity will more than offset that change as well.

“It’s still so low so I’m not worried about it from that perspective.”

Last year, Octopus Electric Vehicles claimed the number of drivers leasing electric vehicles had soared since new tax rules were introduced.

They said they had seen a 91 percent increase in electric car leasing since the new scheme was launched.

Ms Howarth has previously called the changes a “financial game-changer” and switching to electric cars was a “no brainer.”

The British Vehicle Rental and Leasing Association (BVRLA) said the new benefit in kind changes had led to a “long-awaited surge” in electric car leases.

Gerry Keaney, spokesperson for the BVRLA said one-fifth of the car leasing fleet now relies on electric vehicles.

He said: Quarter three of last year delivered the long-awaited surge in BEV registrations that we expected after the introduction of the zero-rate BiK incentive.”

“A massive 21 percent of new business contract hire car registrations were BEVs, once again demonstrating that the company car sector is driving the transition to zero-emission motoring.”

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