Why motorists could pay more in car tax in 2022
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Benefit-in-Kind (BiK) tax rates are set to change in April rising from one percent to two percent for fully electric vehicles. Following this upcoming tax year, the BiK rate will remain at two percent until 2025, although many drivers and experts believe more could be done.
Steve Tigar, CEO of loveelectric.cars, said the “mini-Budget” could have gone further to help drivers.
He said: “A simple guarantee in the Government’s 2022 Spring Statement would have helped drivers, their families, and the environment.
“The fuel duty cut in the Spring Statement offers most car drivers temporary relief to rocketing fuel prices.
“But it doesn’t decarbonise UK road transport by helping drivers to adopt electric vehicles.
“The Chancellor could have helped drivers save even more money by maintaining Benefit in Kind (BiK) tax rates for EVs at the current low level until 2030.
“We calculate keeping BiK rates the same would encourage two million more drivers to switch to EVs, benefiting them, their families, and the environment.”
The company scheme operates as a “salary sacrifice” employee benefit where an employee gives up a small part of their salary in exchange for a brand new, fully electric car.
The salary sacrifice is deducted from their gross salary so the employee will pay less income tax and National Insurance.
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The employer will reduce their bill for national insurance contributions.
Non-monetary benefits provided by an employer are required to be taxed, which is the BiK tax.
BiK tax is usually high for petrol and diesel cars; hence, salary sacrifice on cars has typically not been very popular.
However, BiK rates on electric cars have been set by the Government at an incredibly low percentage up until 2025.
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