New Benefit in Kind tax rules for UK drivers with 'targeted action needed'

The new Labour government has been called to make changes to Benefit in Kind rules. Car drivers in the UK face new Benefit in Kind rates thanks to the new Labour Party government, with Sir Keir Starmer becoming Prime Minister on Friday, July 5.

At present, the BiK tables have only been published until 2027/28, despite the fact that many vehicle contracts run past this date and they may see a hike in their costs. Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said: "The time for blanket decarbonisation policies has been and gone.

"As the transition towards cleaner, greener vehicles evolves, the need for specific interventions becomes clear. Up to now, powerful tax incentives for company-provided cars have accelerated adoption among fleets but left retail and rental lagging. For the transition to be embraced by all sectors, targeted action is needed."

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Benefits in kind are benefits that employees or directors receive from their company which aren’t included in their salary or wages. They’re also sometimes called ‘perks’ or ‘fringe benefits’. Benefit-in-kind (or BIK) is a tax on employees who receive benefits or perks on top of their salary. If you have a company car for private use, you will have to pay a BIK contribution, or company car tax.

Every car has a BIK percentage banding. This is based on CO2 emissions, and a P11D value, which is the list price, including extras and VAT, but without the first year registration fee and vehicle tax. Ian Plummer, commercial director of Auto Trader, added: "That means protecting the existing salary sacrifice and BiK incentives to support the new electric car market, and targeted financial incentives on used electric cars to support greater adoption.

“We also need to be proactive and transparent about future changes in road pricing and taxes for electric cars so consumers can plan accordingly."