HM Revenue and Customs (HMRC) is facing criticism for imposing substantial Benefit-in-Kind (BiK) tax charges on diesel vehicle drivers, as new rates introduced at the start of the financial year in April remain in place. These rates, initially brought in under former Chancellor Rachel Reeves, are set to continue under Chancellor John Healey until at least November, with the upcoming Autumn Budget yet to be announced.
Company cars are subject to BiK tax, which applies additional charges based on vehicle emissions and other factors. Last year, approximately 920,000 employees were reported to receive company car benefits. Interestingly, the average taxable value of car benefits has reduced by more than half since 2019-2020, decreasing from £6,770 to £3,330 in the current 2024-2025 tax year.
Despite this overall decrease, experts argue that the current BiK rates disproportionately burden diesel car users, especially those who typically cover longer distances due to their work. Robert Salter, a director at accounting firm Blick Rothenburg, highlighted that while 51% of company car users now drive fully electric vehicles, those who require vehicles for high-mileage travel continue to face challenges.
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“Many sales executives drive 20,000 to 30,000 business miles annually as a key part of their job, and employers may still expect these individuals to have a diesel vehicle,” Salter explained. “Such employees would rarely be able to benefit from a fully electric vehicle due to mileage limitations.”
Under the current BiK tax system, the most polluting petrol and diesel vehicles-those emitting over 155g/km of CO₂-are subject to a tax rate of 37%, expected to rise to 39% in future years. The BiK rates vary according to CO₂ emissions and electric range for plug-in hybrids, with rates from 4% for zero-emission vehicles to 37% for the highest emitters. These incremental rates were adjusted in April, with many rising by 1 percentage point across emission bands.
This continuation of existing tax rates reflects the government’s ongoing commitment to encouraging low-emission vehicles, despite concerns from sectors reliant on diesel vehicles for extensive travel needs.