UK government tax policy hits company car drivers unfairly. And whatever the government tries to suggest, it’s got very little to do with protecting the environment.
That is TMC’s conclusion from our review of changes affecting company car drivers in the last four Budgets.
Thanks to which, company car users will pay around £550 million more tax this year than they would have expected four years ago.
Most of the extra burden will come from the recently-introduced policy of doubling the annual rise in company car tax (CCT) rates to two percentage points. £70 million will be raised this year by the controversial decision to increase the diesel BIK supplement to four percentage points.
Higher taxes on company cars. Lower taxes on everyone else
Budget tax increases are usually announced a few years in advance, like the move to a 2ppt annual rate increase in company car BIK – set in the 2014 Budget but not sprung until 2017.
In fact, the 2014 Budget demonstrates how company car drivers have been singled out for above-average tax rises:
Overall, policy decisions in the 2014 Budget actually lopped £1.6 billion from the amount of revenue the government planned to raise from all types of taxation in 2018-19. That works out at an average of £55 in tax not taken from each of Britain’s 30 million taxpayers this year. But company car drivers will each pay an average of £495 more tax in 2018-19 alone, due solely to the BIK changes announced in the 2014 Budget.
The degree to which the government’s revenue plans are heavily focused on the three per cent of taxpayers who drive company cars can be judged from the fact that, it has announced in the last four Budgets that CCT will increase by an extra £1 billion between 2018 and 2022. That is on top of the annual increases designed into the original CO2 BIK system. Meanwhile, all the other Budget changes since 2014 add up to a £5 billion reduction for UK taxpayers as a whole over the next five years compared with earlier revenue projections.
The missing case for air quality
What about the environment? The reason originally given for saddling company car drivers, unlike any other group of taxpayers, with statutory annual increases in BIK.
The huge increases in CCT scheduled from 2014 onwards weren’t given any environmental justification. The 2014, 2015 and 2016 statements contained not one mention of air quality or traffic pollution despite the £1 billion they added to company drivers’ future tax bills.
The Treasury only quoted air quality after carrying out those unprecedented raids on CCT. There were nine mentions in the 2017 Budget statement – presumably to lend credence to the infamous decision to add a further one percentage point to the diesel BIK surcharge. That move, made with just five months’ notice, will cost diesel company car drivers a further £70 million in 2018.
The old regime of progressive, predictable rate rises has gone out the window. CCT for drivers of zero-emission cars is about to go ballistic: shooting up by 78 per cent this year and next, before plummeting by nearly 90 per cent in two years’ time. CCT on most diesel company cars will increase by around ten times the rate of inflation over the next two years.
This is crazy. UK company car drivers exert a degree of influence on the fight for cleaner, safer roads and a strong economy that is out of all proportion to their small number. Officials in the Treasury, DfT and Department for Energy and Climate Change have either forgotten or don’t understand this.
Unless they change course very soon, they will surely kill the goose which lays the golden eggs.