The imminent increase in Benefit-In-Kind (BIK) rates – otherwise known as company car tax – has triggered many fleet managers to make the switch to electric vehicles, with a salary sacrifice car scheme looking more attractive than ever.

In the Government’s 2024 Autumn Budget, chancellor Rachel Reeves announced a significant hike in BIK rates for petrol and diesel vehicles from 2028, and while EVs also saw an increase in BIK tax, they still represent a considerable saving compared to fossil fuel vehicles, and particularly if funded through a salary sacrifice car scheme.

The BIK rate for petrol and diesel vehicles (technically, vehicles with emissions of 51g/km CO2 and over) will increase by 1% per year in 2028-29 and 2029-30. The maximum payable rate will also increase by 1% per year to 38% for 2028-2029 and 39% for 2029-2030. The BIK rate is currently anything between 15-37% depending on the emissions, i.e. ranging from 51-54 g/km CO2 to 170 g/km CO2 and over.

What the BIK rate increases could mean for your fleet

A more immediate and significant hike came in the form of double-cab pick-ups, known as DCPUs. These are a popular model of vehicle for fleets, given their ability to transport both people and tools, equipment and machinery. However, DCPUs with payloads of one tonne or more will now be treated as company cars for the purposes of BIK tax. Which means, from April 1^st 2025, a 2.0-litre diesel Ford Ranger, for example, will now be in the highest BIK tax bracket of 37%, meaning anyone in the 40% tax bracket will pay £8800 annually in BIK tax. Currently, there is a fixed annual BIK charge of £3960 for all light-commercial vehicles.

If a fleet manager opted to lease fleet vehicles prior to April 1^st, they can avoid these increased charges for the duration of the lease, or until April 2029, whichever is sooner. However, if a fleet manager opted for a salary sacrifice car scheme, they can avoid any significant BIK charges altogether.

Currently, the BIK rate for EVs with zero emissions is 2%, an incentive to maintain the appeal of EVs and to encourage the switch to electric driving. The Autumn Budget, however, announced that the BIK rate for EVs would increase by 1% per year until it hits 7% in 2028. After that it would increase to 9% in 2029 and remain at that. Straight away you can see that this represents a huge subsidy for EV drivers, and can even be ten times less than the BIK rate enjoyed by drivers of hybrid vehicles (plug-in or self-charging).

The benefits of going electric with a salary sacrifice car scheme

Undoubtedly this makes salary sacrifice schemes more appealing, particularly as they include EVs which also qualify a scheme member to take the salary reduction on their gross pay rather than their net pay. This means that, ultimately, they are paying less income tax and national insurance, as well as enjoying cheaper motoring on a cost per mile basis, compared to petrol and diesel vehicles, and also improving their own carbon impact.

Fleet managers should be looking to futureproof their fleets by making the switch to EV driving now, via a salary sacrifice car scheme. This will bring immediate and considerable savings in BIK tax, as well as delivering flexible lease deals, low-cost service and maintenance, better employee morale and loyalty and an improvement in the environmental performance of the business. The salary sacrifice car scheme offered by Pink Salary Exchange is an industry-leading package and represents the next generation of salary sacrifice car schemes, so contact our team today to learn more, and make sure your fleet is futureproofed against BIK rate increases.