April Road Tax and BIK Tax Increases
Come April this year, the UK government is amending the way that Vehicle Excise Duty (also known as “road tax”) and Benefit-in-Kind (BIK) for Company Car Tax is calculated. This April, tax changes will result in some of the biggest cost increases for drivers.
Vehicle Excise Duty will increase from April 1st 2020.
BIK on petrol and diesel vehicles will increase from 6th April 2020.
BIK on hybrid and electric cars is also changing from 6th April 2020.
These tax changes are due to an updated emission test called WLTP. Read on to find out more about WLTP and how customers who are interested in leasing a vehicle this year might be impacted.
What is WLTP?
WLTP stands for Worldwide Harmonised Light Vehicle Test Procedure. It is the name of the test used to measure how economical a passenger car is, by measuring 3 things:
- Fuel consumption
- CO2 emissions
- Pollutant emissions
For electric cars, energy consumption is measured.
The new WLTP tests replace the NEDC (New European Driving Cycle) which, up until now, is how vehicles were tested based on theoretical driving. The NEDC was designed in the 80s so advancements in technology and changes in driving conditions mean testing can now be much more rigorous to provide more accurate results. WLTP, however, uses real-driving data and should therefore be more accurate as the test better represents real driving-profiles.
From April 2020, WLTP will replace NEDC as the means of establishing the official fuel consumption and CO2 emissions of new vehicles. The switch from NEDC to WLTP has been in progress since September 2017.
How Does This Affect Me?
The new WLTP data offers us more accurate CO2 values than the old NEDC test. This affects:
All customers who lease a new car after 1st April 2020 need to be aware of the following:
For vehicles registered on or after 1st April 2020, road tax costs will be based on the new WLTP CO2 values and not the outdated NEDC values. This may change the monthly rental cost.
For vehicles registered before the 1st April 2020, road tax costs won’t be affected - this will be based on the current NEDC values.
For vehicles registered on or after the 6th April 2020, BIK will be based on the new WLTP CO2 values.
For vehicles registered on or before the 5th April 2020, BIK won’t be affected - this will be based on the current NEDC values.
You should be aware that if you add Vehicle Options to your personal or business vehicle lease, these could affect the CO2 emissions and therefore the VED or BIK value may change. Also, it may not be possible to register some vehicles on or between the 1st and 5th April 2020. Therefore, this may cause a slight delay to the registration and delivery of your vehicle.
The government will be announcing the increased VED and BIK charges as part of the UK Budget on 11th March. However, until then, information on both taxes is based on current values and so will change.
Note: This content is for information purposes only and does not constitute legal or financial advice.