Benefit-in-kind or BIK tax – also known as company car tax – applies to anyone who has personal use of a company vehicle. In most cases this is likely to be a company car or van but could also apply to a pool car or hire cars paid for by your employer, if you use them for personal trips – including commuting.
How do I calculate BIK tax?
The rate of BIK tax you pay is based on the value of the car, the amount of CO2 it emits and your personal income tax band. For these purposes, you need to know the P11D Value of your company car – that’s the list price of the car, including any optional extras, accessories and VAT, but excluding the first-year VED charge and registration fee.
Note: The P11D value cannot include any manufacturer discounts or the plug-in car grant.
You also need to know what BIK band your car sits in. The bands are published by HMRC and are based on CO2 emissions (and electric range for plug-in hybrids). You can view the bands further down this page.
The BIK band dictates what percentage of your car’s P11D value – also known as the BIK value – you’ll be taxed on. But the actual amount of BIK tax you pay is based on your personal income tax band. That sounds hideously complex, so here’s an example that demonstrates how simple the calculation actually is.
Your company car is a Volkswagen Golf 1.5 TSI Style. It has a P11D value of £29,245. It emits 124g/km of CO2, which means BIK tax is charged at a rate of 29% of the P11D value – that works out at £8,481.
If you’re in the 20% income tax band, the amount of BIK tax you’ll pay is 20% of £8,481, which is £1,696 per year. If you’re in the 40% income tax bracket, you’ll pay £3,392 per year.
BIK tax is paid monthly, so you simply divide the total amount you’ll be paying by 12 to work out the monthly cost. If you’re paying £1,696 in total, that’s £141 which is deducted from your pre-tax salary.
You can find the company car tax costs for all new cars using the company car tax calculator at our sister site, Fleet News.
What are the BIK rates from 2023 to 2024?
The table below outlines the BIK tax bands for tax years 2023-24 through to 2027-28. The bands are based on a car’s CO2 emissions (and electric range for plug-in hybrids). These bands apply to vehicles registered after 6 April 2021.
| CO2 (g/km) | Electric range (miles) | 2023-24 (%) | 2024-25 (%) | 2025-26 (%) | 2026-27 (%) | 2027-28 (%) |
| 0 | – | 2 | 2 | 3 | 4 | 5 |
| 1-50 | >130 | 2 | 2 | 3 | 4 | 5 |
| 1-50 | 70-129 | 5 | 5 | 6 | 7 | 8 |
| 1-50 | 40-69 | 8 | 8 | 9 | 10 | 11 |
| 1-50 | 30-39 | 12 | 12 | 13 | 14 | 15 |
| 1-50 | <30 | 14 | 14 | 15 | 16 | 17 |
| 51-54 | 15 | 15 | 16 | 17 | 18 | |
| 55-59 | 16 | 16 | 17 | 18 | 19 | |
| 60-64 | 17 | 17 | 18 | 19 | 20 | |
| 65-69 | 18 | 18 | 19 | 20 | 21 | |
| 70-74 | 19 | 19 | 20 | 21 | 21 | |
| 75-79 | 20 | 20 | 21 | 21 | 21 | |
| 80-84 | 21 | 21 | 22 | 22 | 22 | |
| 85-89 | 22 | 22 | 23 | 23 | 23 | |
| 90-94 | 23 | 23 | 24 | 24 | 24 | |
| 95-99 | 24 | 24 | 25 | 25 | 25 | |
| 100-104 | 25 | 25 | 26 | 26 | 26 | |
| 105-109 | 26 | 26 | 27 | 27 | 27 | |
| 110-114 | 27 | 27 | 28 | 28 | 28 | |
| 115-119 | 28 | 28 | 29 | 29 | 29 | |
| 120-124 | 29 | 29 | 30 | 30 | 30 | |
| 125-129 | 30 | 30 | 31 | 31 | 31 | |
| 130-134 | 31 | 31 | 32 | 32 | 32 | |
| 135-139 | 32 | 32 | 33 | 33 | 33 | |
| 140-144 | 33 | 33 | 34 | 34 | 34 | |
| 145-149 | 34 | 34 | 35 | 35 | 35 | |
| 150-154 | 35 | 35 | 36 | 36 | 36 | |
| 155-159 | 36 | 36 | 37 | 37 | 37 | |
| 160-164 | 37 | 37 | 37 | 37 | 37 | |
| 165-169 | 37 | 37 | 37 | 37 | 37 | |
| 170+ | 37 | 37 | 37 | 37 | 37 |
Different rates apply to older cars registered before 6 April 2021
Are there BIK tax discounts for electric and hybrid cars?
The BIK rates shown in the table above apply to all vehicles registered after 6 April 2021. The BIK for electric cars such as the Vauxhall Mokka Electric (below), was once 0%, however the rate currently stands at 2% and will gradually increase to 5% for the 2027-28 financial year.
What about diesels – do I have to pay extra?
If you have a company car that was registered in the period 2018 to 2020, a 4% surcharge applies to any diesel car that does not meet the latest Euro 6d emissions standards – also known as RDE2 compliance. The surcharge is applied to the BIK band, so a car that falls into the 24% band would be pushed up to 28%. All cars sold after 1 January 2021 must comply with RDE2, however, so the surcharge will only apply to older vehicles.
How does the fuel benefit relate to a company car?
Fuel benefit applies if you have unrestricted access to a company car for private use and your company pays the full fuel bill. If you reimburse your employer for fuel, following the rates per mile set out in the quarterly-updated Advisory Fuel Rates, you do not incur a fuel benefit tax.
Fuel benefit tax is based on flat annual rate that’s £27,800 in the 2023-34 financial year. The percentage of that figure that you have to pay in tax is tied to your company car’s BIK tax band and your income tax band.
So, if your car is the 29% BIK band, you have have to pay fuel benefit tax on 29% of £27,800, which is £8,062. If you pay income tax at 20%, that works out as an annual fuel benefit bill of £1,612. If you’re the 40% income tax bracket, you pay £3,224. That’s on top of paying BIK tax.
Vans and appropriate pickups and commercial vehicles attract a flat-rate fuel benefit of £757 per year for 2023-24. Again, what percentage of that you pay in fuel benefit fuel tax is tied to your income tax bracket.
Electric cars do not currently incur a fuel benefit charge, though you can be reimbursed for your charging costs. A charging point provided for your use and paid for by the company can still be an attractive benefit and an incentive to switch to a greener vehicle.
How does BIK tax compare with salary sacrifice or cash alternative schemes?
Unlike company car schemes, where the company pays for the car, in salary sacrifice arrangements you pay for the car by ‘sacrificing’ some of your pre-tax salary. A salary sacrifice car can still be eligible for BIK tax. A driver will be taxed on whatever the greater of:
- the income tax due on the amount of salary sacrificed on the finance or rental of the vehicle
- the BIK tax charge on the car
For salary sacrifice cars with CO2 emissions of less than 75g/km, BIK tax rules are applied by default which can make electric and plug-in hybrid cars more cost effective. You can find out more about salary sacrifice on Parkers.
It’s a similar situation if you take a cash alternative. If you receive an additional £6,000 per year in lieu of taking a company car that incurs BIK tax of, say, £3,560, you will be taxed for the full £6,000 – with a corresponding increase in National Insurance contributions, plus a potentially higher income tax bracket to reflect your higher gross salary.
In other words, you’re going to be taxed on the benefit you actually receive, be it extra income that facilitates being or leasing a vehicle yourself, or the company providing you with a vehicle.
How much BIK tax will I pay on a company van?
We have a full guide to van tax. In short, he good news about company vans is that BIK tax is charged at a fixed rate.
What’s more, you’ll only pay BIK on a van if you have personal use of it. You’re allowed ‘reasonable’ use of a van before you have to pay BIK, but this means only taking it home if you’ve got an early start in the morning, and limiting personal-use journeys to a short detour to pick up a newspaper or lunch. BIK will be applied if you use a van for the weekly supermarket shop, for instance.
The current van BIK rate is £3,960, and the amount you pay is calculated by multiplying that by your income tax banding. This works out at £792 per year at the 20% rate or £1,584 per year at the 40% rate. If lots of people share the van, the BIK cost can be divided between them, and remember the higher rate only applies to the income or benefit over the threshold. The same rules apply to pickups.
How do I avoid BIK on my company car?
The cost of BIK and fuel benefit tax can really add up so it might be tempting to try to avoid it, especially if you’re a sole trader who isn’t answerable to a big corporation’s finance department. But it’s not worth trying.
HMRC is very good at keeping tabs on who has use of a company car and does catch up to people who haven’t paid the tax they should. In those cases, there are usually penalties and interest to pay on top of the tax owed; particularly egregious offences could see you being disqualified from running a business or even convicted of fraud.
Common BIK tax terms
Benefit-in-kind (BIK): this is any benefit which employees receive from their employer that’s not included in their salary. In our example, we’re talking about company cars, which are taxed according to the employee’s earned salary.
Emissions: the gases a car emits from its exhaust. For BIK tax, the key gas is carbon dioxide (CO2).
g/km: the amount of carbon dioxide emitted by a car is measure in grams per kilometre.
P11D: this is the form that each employer must fill in annually and send to the tax office to show that they have benefitted from a company care.
P11D value: this is the value of your company car including the list price, VAT, delivery charge and any extras such as metallic paint or satellite navigation. It does not include first-year VED or registration fees.
Personal tax allowance: this is the sum of money you can earn without being taxed. It currently stands at £12,570 in the 2023-24 financial year.
