Your complete guide to BIK Tax

  • Parkers explains what BIK is
  • How it affects the tax you pay on a company car
  • Find out which BIK band your car is in
  • Parkers explains what BIK is
  • How it affects the tax you pay on a company car
  • Find out which BIK band your car is in

If you’re lucky enough to be offered a company car as part of your remuneration package, you’ll also be unlucky enough to be subject to benefit-in-kind (BIK) tax.

But what is BIK, why do you have to pay it and how is it calculated? Parkers has the answers…

What is BIK?

Benefit-in-kind is a tax levied on employees who receive perks in addition to their salary as part of their remuneration package.

If you have a company car which is made available for private use (i.e you take it home in the evenings and at weekends), the taxman will apply a benefit-in-kind value to the vehicle.

How is BIK calculated?

To work out the BIK value of a company car, you multiply the car’s P11d price (list price including optional extras, VAT and delivery charges, less the first year registration fee and annual road tax) by the percentage banding the car sits in.

You can find your car’s BIK banding here.

As an example, a Volkswagen Golf 1.6 TDI S 5-door has a P11d value of £20,370 and emits 106g/km of CO2, putting it in the 23% BIK band. Therefore, the BIK value is £20,370 x 23% = £4,685.

To get the amount your company car will cost you in tax per year, you then multiply the BIK value by your income tax banding.

Therefore, a base rate taxpayer in the Golf will pay £4,685 x 20% = £937 per annum. For a 40% taxpayer, the calculation is £4,685 x 40% = £1,874 per annum.

To use the Parkers Company Car Tax Calculator, click here

What about BIK on vans?

If you have personal use of a company van then BIK may be applied at a base rate of £3,230 (or £646 for electric vans) dependant on how frequently it is used. You are allowed ‘reasonable’ use of a van before you have to pay BIK so you will be able to take it home at night; but if you use a company van as a weekend runabout or to go on holiday, BIK will need to be applied.

To get your van BIK you multiply £3,230 by your income tax banding (either 20% or 40%). If multiple people share the van, divide that £3,230 figure by the number of employees using it first.

This section of BIK is particularly applicable to double cab pickups such as the Mitsubishi L200 and Nissan Navara, both of which offer four doors, comfortable cabins and seating for five adults. To qualify as a commercial vehicle, it must have a payload of one tonne.

Does BIK apply to free fuel?

Some companies will pay for an employee’s private fuel (i.e commuting and leisure mileage) as well as paying for business miles. If this is the case, benefit-in-kind tax will apply to the fuel perk, too.

The taxman sets a notional figure of £22,600 for the fuel benefit charge multiplier, which is then multiplied by the BIK percentage banding.

Using the same Volkswagen Golf 1.6 TDI as an example, the fuel benefit charge will be calculated as follows: £22,600 x 23% = £5,198. To work out how much tax the fuel benefit will cost, multiply by your income tax banding:

£5,198 x 20% = £1,040 per annum or £87 a month
£5,198 x 40% = £2,079 or £173 a month

Paying this much tax a month for the benefit of ‘free’ fuel means that you need to calculate how much fuel you’re getting from your company for private mileage to be certain whether it’s a worthwhile perk.

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