Scottish company car drivers face bigger benefit-in-kind tax than rest of UK

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Company car drivers in Scotland face larger increases in benefit-in-kind tax rates than those in the rest of the UK due to also being hit by a rise in income tax.

The increased were announced in chancellor Philip Hammond’s first ever Spring Statement.

These new income tax rates for Scotland, due to take effect from April 6th, will add a further layer of administrations for businesses compared with England, Wales and Northern Ireland.

Significant changes to the structure of income tax are being introduced by the Scottish Parliament. The proposed five-band regime contrasts with the three-tier structure applicable in the rest of Britain.

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 per cent, 20 per cent, 21 per cent, 41 per cent and 46 per cent.

It means that top earners and those on a middle income – earning £24,001 or more – face a one per cent rise in income tax versus employees in the rest of the UK.

Income tax rates for the remainder of the UK are 20 per cent, 40 per cent and 45 per cent, depending on earnings.

As a result of the income tax increase, a majority of Scotland’s company car tax drivers 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.

Ben Robb, brand manager at Dieselink, reacted by saying: “It seems dreadfully unfair that Scottish company car drivers pay more than their English, Welsh and Irish counterparts. We hope that Mr Hammond realises the injustice and makes amends.”