Increase to Personal Tax Charge on Commercial Vehicles
From April 2023, if you own a commercial vehicle in your business, you may not be aware that your Benefit in Kind (BIK) - or personal tax charge levied via your personal self assessment tax return - is going up.
Jeremy Hunt, the Chancellor of the Exchequer, announced in the Autumn Statement the rise in BIK in line with inflation or the consumer price index. The backdrop of soaring fuel costs will mean tax rises both via your business and personal taxes.
From April 2023, business owners will face higher taxes if they own a commercial vehicle
What is Benefit in Kind (BIK)?
The BIK applies to any non-cash incentive you receive as a director or your employees receive via your business. As these benefits are perks they are treated as taxable income and a personal tax charge is levied via your personal tax return, or for employees, via their monthly payslips or one off payment annually. Some perks include health insurance for employees and for directors, company cars or vans.
Having a company car or van means you can expense all costs related to the vehicle through the business, including cost of the vehicle itself and all related running costs. You can even claim back the VAT in most cases if you or your limited company is VAT registered.
However, the downside is that there will also be a BIK applied to you personally for this perk to cover any personal use of the vehicle.
BIK is calculated on the CO2 emission of the vehicle and the list price of the car or van. So the higher the CO2 emission the higher the cost to you personally.
What is changing in the new tax year?
From April 2023, the BIK is rising in line with inflation, which means that you will see an increase of 10% on your BIK charge for the tax year 2023/24 onwards.
Basic rate taxpayers currently paying £720 as a benefit in kind to use company vans for personal journeys will pay an additional 10 per cent – £72 a year – from April 6 next year. Higher rate taxpayers face a £144 charge.
With the backdrop of soaring fuel costs, van drivers could be hit by at least £500 in extra running costs from the new tax year, for each commercial vehicle they own.
