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Budget 2014: 2% annual BIK rises confirmed for 2017/18 and 2018/19

Date: 19 March 2014   |   Author:

The chancellor has delved into the pocket of company car drivers in his 2014 Budget, confirming 2% Benefit-in-Kind increases for both the 2017/18 and 2018/19 tax years for all vehicles over 75g/km, which means an entry rate of 13% in 17/18, rising to a minimum 19% of the vehicle's value for cars between 75-94g/km in the 2018 tax year.

The maximum band remains at 37%, and will apply to all vehicles over 189g/km in 2017 and 179g/km the following tax year, which at least means the notice period for BIK has been extended to four years rather than the previous three.

The only exemption to this is vehicles under 75g/km, which will actually find their BIK bands accelerating faster than the rest of the industry, despite the chancellor George Osborne claiming in his Budget speech that he was "increasing the discount for low-emission vehicles".

According to the Budget documentation, the differential of four percentage points will close to three in 2017/18 and just two percentage points the following year.

So a driver of a zero-emission vehicle that will pay no BIK at all in 2014/15 will find themselves in the 13% tax band for 2018/19, with the promise of the gap closing further the following year, though BIK bands have not been confirmed for 2019/20.

It was also confirmed that the current three percentage point diesel penalty will be removed from April 2016 and that VED would rise in line with the Retail Prices Index from 1 April 2014. It will also freeze the VED rates for Euro IV and V light goods vehicles in 2014/15.