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New 10% low as benefit-in-kind tax tightens

Date: 06 March 2008

From April any cars emitting below 121g/km of CO2 will be subject to a new 10% BIK charge. But that's not the only change business car managers can expect from the start of the new tax year, as Paul Barker reports

Business car benefit-in-kind tax bands are shifting on 6 April.

For the first time in three years, the CO2 emissions for each banding drop by 5g/km, which means the 15% tax band now comes down to 135g/km from 140.

But crucially there's also a new sub-121g/km banding that incurs just 10%. Although the 3% diesel penalty still applies, drivers jumping into any models that slot into the new band will see a hefty reduction in monthly BIK contribution.

A lower-rate tax payer running a three-door BMW 118d SE will now pay £20 less per month in tax, while a Ford Focus 1.6 TDCi Style will cost £14 per month less. And that's before the income tax change that drops the lower rate from 22% down to 20% from this financial year.

There's also good news for the tiny number of fleets running biofuels, as models using the fuel will now get a two-band BIK reduction.

April also brings changes to Vehicle Excise Duty, which sees cars between 101-120g/km stay at £35 per year while those emitting 120-150g/km rise by £5 to £120, or £100 for alternative-fuelled hybrids and LPG vehicles.

At the other end of the scale, the max 35% BIK band now covers anything over 234g/km, and the top VED band of G now means all models over 225g/km will be hit by a £100 increase in VED, taking it to £400 per year.

. For all Budget news on 12 March go to