New rates for diesels come into force

From the start of this month, new company car taxes for diesels come into force, following the Government’s decision to increase the surcharge for diesel cars from 3% to 4% at last November’s Autumn Budget Statement.

For fleet operators who run primarily diesel cars this is an additional financial burden that is estimated to affect more than 800,000 drivers of diesel company cars, who are expected to pay out £70 million extra in company car tax in the current tax year, 2018-19.

The Benefit in kind (BIK) surcharge applies to diesel company cars – but not diesel hybrids –unless they meet the Real Driving Emissions Step 2 standard (RDE2), a new standard to which all new car models must be subjected but which was only introduced in September and which will apply to all new registrations from September 2019.

The European Union timetable for the introduction of RDE2 means that it is almost certain that no diesel cars currently on the UK roads will meet the new standards and therefore be exempt from the increased charge.

Indeed, the government said at the Budget: “It is likely that few, if any, cars will meet RDE2 standards in 2018 to 2019.”

However, the government also argues that 350,000 company car drivers per year replace their company cars so that, within a few years, most affected drivers would have had the opportunity to choose new cars not subject to the supplement.

One of the stipulations of the current Euro 6 emissions testing regulation is that new cars must emit less than 80mg/km of toxic nitrogen oxides (NOx). But cars that pass Euro 6 laboratory tests have been shown to emit greatly more than 80mg/km in the real world

To complicate matters further, there is some leniency built into the RDE2 test stage in that cars that conform will not be penalised if they are found to emit 1.5 times the 80mg/km outside test conditions.

On top of the rise in BIK rates for diesels, there is also an increase in Vehicle Excise Duty for diesels from the start of this month.

All new diesel cars will go up by an extra VED band if they fail to meet the RDE2 test, which according to Treasury estimates,  is less than two million cars. The changes only apply to new diesel cars, not vans, and do not impact the new £140 yearly fees all cars have to pay after the first year.

Any car failing to meet the Euro 6 standards in real world testing would move up a band, and thus pay anything from £15 to £560 more in first year rates.

Company car tax bands 2018/2019:

*Diesel cars that meet RDE2 are charged at the standard BIK percentage rate.

“The combination of the new BIK rates and VED rules for diesel cars make fleet policy planning and selecting the right mix of vehicles for your fleet more important than ever before,” said Fleet Alliance managing director, Martin Brown.