Fleet News

Warning over diesel as BIK tax 'cure-all'

FLEETS are in danger of being carried away on a diesel 'magic carpet' in the false belief the fuel provides a failsafe solution to reduce drivers' tax bills, when they could end up paying more.

Many petrol-engined cars in the supermini, lower-medium and upper-medium sectors incur the lowest level of benefit-in-kind (BIK) tax at 15% of their P11D prices under the new carbon dioxide-based regime.

But while the lowest tax level a diesel can currently provide is 18%, because of a 3% tax supplement on cars powered by the fuel, drivers are opting for heavy-oil vehicles in the assumption they should pay less tax because of their cars' low carbon dioxide emissions.

Nigel Underdown, director of marketing at Godfrey Davis (Contract Hire), said: 'The explosion in diesel registrations, most markedly in the fleet sector, suggests that many organisations are adopting the diesel doctrine as a cure-all remedy to reduce drivers' taxation under the new tax system.

'But while diesels produce savings in some situations, it is by no means an automatic call - there are still numerous scenarios where petrol remains the most cost-effective option.'

Drivers and fleet decision-makers need to weigh up the value - in taxation terms - of a lower priced petrol-engined model with higher CO2 emissions against a lower emissions diesel with a higher P11D price.

'Employers restricting drivers from making sensible change have to re-evaluate choice policy', said Underdown.

Petrol-engined cars give BIK tax savings to drivers, although in the executive sector, a diesel model is more beneficial in tax terms.

However, while there may be benefits for the driver in using a petrol car, the employer may find its fuel bill suffering as a result, if the fleet has a large number of high-mileage drivers.

Underdown said: 'There are numerous factors to be taken into consideration when deciding on fleet make-up.

'The successful fleet will be the one that strikes a balance between driver needs and corporate requirements.'

  • What do you think? Email fleetnews@emap.com
  • Leave a comment for your chance to win £20 of John Lewis vouchers.

    Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

    Login to comment

    Comments

    No comments have been made yet.

    Compare costs of your company cars

    Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

    What is your BIK car tax liability?

    The Fleet News car tax calculator lets you work out tax costs for both employer and employee