Fleet News

Company car drivers in Scotland hit by BIK increase as new income tax rates bite

Row of parked cars

An increase in income tax in Scotland will see company car drivers north of the border face larger increases in benefit-in-kind (BIK) tax rates than those in the rest of the UK from April 6.

The new income tax rates for Scotland compared with the rest of the UK add a further layer of administrations for businesses.

The Scottish Parliament is introducing significant changes to the structure of income tax. There will be a five-band regime, which contrasts with the three-band structure applicable in England, Northern Ireland and Wales.

In Scotland, the basic rate band is effectively being split into three - starter, basic and intermediate - to which is added the higher rate band and the top rate band. Applicable income tax rates are: 19%, 20%, 21%, 41% and 46%. It means that middle income - those earning £24,001 and above - and top earners face a 1% rise in income tax versus employees in the rest of the UK. Income tax rates for the remainder of the UK are: 20%, 40% and 45% depending on earnings.

As a result of the income tax increase, a majority of company car tax drivers’ resident in Scotland will face larger increases in benefit-in-kind tax than their counterparts in the rest of the UK as an employee’s tax rate is used in the calculation.

Consequently, only a small number of company car driving employees on lower salaries are expected to escape the double hit of a benefit-in-kind tax rise and an income tax hike.

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