Benefit in Kind (BIK) Electric Car Tax Guide
The complete guide to Benefit in Kind, sometimes referred to as electric company car tax, covering what a company and employee need to contribute and how it is calculated.
Last updated: Aug 29, 2024 • 8 min read
Summary
Company car tax, officially known as Benefit in Kind Tax (BiK), is calculated based on the P11D value of the vehicle, its CO2 tailpipe emissions and the employee’s income tax band.
- The BiK tax rate is set by HM Treasury and usually collected through your PAYE (pay-as-you-earn).
- You can make considerable savings by choosing a low or zero emissions plug-in vehicle over an equivalent petrol or diesel vehicle.
- BiK rates currently make pure battery and efficient plug-in hybrid electric vehicles more compelling than ever as company car tax on electric cars is much lower.
What is Company Car/Benefit in Kind Tax?
Company car tax is a tax on the “Benefit in Kind” that an employee is receiving through the provision of a car for their personal use.
Benefit in Kind (BiK)
When a car is provided for an employee by their employer that is available for personal use, the employee must pay some tax on the effective benefit that they receive for this.
HM Treasury calculates how much benefit they receive, based on a percentage (BiK rate) of the car’s “P11D” value (see below), compared to just receiving an equivalent amount in pre-income tax pay.
The government can set BiK rates to encourage employers and company car drivers to choose vehicles with lower CO2 emissions like fully electric cars or plug-in hybrids.
P11D Value
Named after a form filed by employers and sent to the tax office with which their Pay As You Earn scheme is registered, the P11D value of a car is comprised of:
- Vehicle list price
- Optional extras
- Delivery fees
- Value Added Tax (VAT)
Employer’s National Insurance
As well as the employee paying BiK tax on their car, the employer must also pay employer’s national insurance on the car’s BiK value, which is currently set at 13.8%.
Tip: Please note this guide is referring to Benefit in Kind taxation on the cost of a company electric car. BiK is also relevant to electricity provided to charge employees' vehicles at the workplace, although this is currently exempt (rated at 0%).
Benefit in Kind (BiK) rates as an incentive for electric vehicle (EV) uptake
As around 50% of new cars are obtained by companies, BiK represents a very potent lever available to the government to encourage adoption of the low and zero emission vehicles, especially as BiK makes a significant difference to an individual’s monthly wages.
- The HM Treasury is strongly incentivising full battery electric vehicles (BEVs) using these tax rates, and offers a more modest incentive on plug-in hybrid electric vehicles (PHEV).
- With all BEV drivers paying just 2% in 2022-23, and the company car tax rate on electric cars frozen until at least 2025, a further increased uptake of fully electric company cars is to be expected.
Tip: The recommended reimbursement cost for electricity as a fuel has recently been raised to 9p per mile by the HM Treasury (for fully electric vehicles only - hybrids have AFR rates equivalent to petrol/diesel vehicles).
Tax for Electric Company Vans
If your company provides you with a zero emission van for personal use, that van is not subject to a van benefit charge. For all other vans the charge is currently set at £3,960 for the 2023-24 financial year.
This is set to change in 2025, at which point government wants to align the charge for pure electric vans with all other vans.
Emission figures test procedure
CO2 figures used to determine company car tax rates are based on the Worldwide Harmonised Light vehicles Test Procedure (WLTP), which aims to accurately measure emissions and fuel efficiency.
For cars registered before April 2020, tax rates are still determined from figures based on the outdated NEDC testing procedure.
* For more information on "WLTP", "NEDC" and more, please visit our Electric Vehicle Dictionary.
Tip: The electric range mentioned in the 1-50 g/km column below is also based on the “WLTP” calculation.
Benefit in Kind (BiK) rates for cars registered after April 2020
The table below shows the percentage BiK rates, depending on vehicle CO2 emissions from conventional fuel (only >0 for PHEVs) and using WLTP figures. The table represents electric, petrol and diesel related BiK rates.
The BiK rates are currently frozen until 2025, meaning for zero emission vehicles you'll pay 2% until then. The rate is then set to rise by 1 percentage point across everything except the most polluting cars which will stay at 37%.
Vehicle CO2 emissions |
(Electric, Petrol, RDE2 Diesel) |
||
2023-24 |
2024-25 |
2025-26 |
|
0 g/km |
2% |
2% |
3% |
1-50 g/km (electric range >130 miles) |
2% |
2% |
3% |
1-50 g/km (electric range 70-129 miles) |
5% |
5% |
6% |
1-50 g/km (electric range 40-69 miles) |
8% |
8% |
9% |
1-50 g/km (electric range 30-39 miles) |
12% |
12% |
13% |
1-50 g/km (electric range <30 miles) |
14% |
14% |
15% |
51-54 g/km |
15% |
15% |
16% |
55-59 g/km |
16% |
16% |
17% |
60-64 g/km |
17% |
17% |
18% |
65-69 g/km |
18% |
18% |
19% |
70-74 g/km |
19% |
19% |
20% |
75-79 g/km |
20% |
20% |
21% |
80-84 g/km |
21% |
21% |
22% |
85-89 g/km |
22% |
22% |
23% |
90-94 g/km |
23% |
23% |
24% |
95-99 g/km |
24% |
24% |
25% |
100-104 g/km |
25% |
25% |
26% |
105-109 g/km |
26% |
26% |
27% |
110-114 g/km |
27% |
27% |
28% |
115-119 g/km |
28% |
28% |
29% |
120-124 g/km |
29% |
29% |
30% |
125-129 g/km |
30% |
30% |
31% |
130-134 g/km |
31% |
31% |
32% |
135-139 g/km |
32% |
32% |
33% |
140-144 g/km |
32% |
33% |
34% |
145-149 g/km |
34% |
34% |
35% |
150-154 g/km |
35% |
35% |
36% |
155-159 g/km |
36% |
36% |
37% |
160-164 g/km |
37% |
37% |
37% |
165-169 g/km |
37% |
37% |
37% |
>170 |
37% |
37% |
37% |
Note: You should add 4% up to a maximum of 37% for diesel cars that are not certified to the Real Driving Emissions 2 (RDE2) standard.
How do you calculate BiK on an electric car?
BiK is taxed according to your income tax banding. In order to work out the BiK tax an employee has to pay, you need to calculate the value of the benefit in kind:
P11D value x BiK rate = BiK value
Worked example from 23rd July 2024
A new Nissan LEAF Acenta has a P11D value of £28,440 and (as a BEV) emits 0g/km of CO2, putting it in the 2% BiK band (percentage rate based on its CO2 emissions).
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 (20-45%).
In 2024-25, the BiK value will be £28,440 x 2% = £568.80
£568.80 x 20% = £113.76 per year / £9.48 per month
£568.80 x 40% = £227.52 per year / £18.96 per month
- £568.80 x 45% = £255.96 per year / £21.33 per month
It is clear that the difference that employees pay for company car tax on electric cars is very significant, when compared with a conventionally fuelled equivalent.
To see the benefits of charging at work check out our workplace charging page.
Comparison of BEV vs ICE from July 2024
Vehicle | Tesla Model Y Long Range Dual Motor |
Ford Mustang Mach 1 |
P11D Value |
£54,935 |
£57,075 |
0-60 mph |
4.8 seconds |
4.2 seconds |
Emissions |
0 gCO2 /km |
270 gCO2 /km |
BiK Rate |
2% |
37% |
2024-25 monthly BiK cost @40% tax rate |
£54,935 x 2% x 40% / 12 £36.62 per month |
£57,075 x 37% x 40% / 12 £703.92 per month |
2025-26 monthly BiK cost @40% tax rate |
£54,935 x 3% x 40% / 12 £54.93 per month |
£57,075 x 37% x 40% / 12 £703.92 per month |
Browse our guides to compare electric vehicles and discover their BiK rates and other helpful stats.
Tip: BiK calculations are non-trivial. The above figures are indicative and give a feel for the values. However, we recommend calculating your own figures inline with your earnings by using the HMRC’s company car and car fuel benefit calculator.
Frequently asked questions about BiK
Does BiK get added to your salary?
No, Benefit in Kind (BiK) doesn’t get added to your salary. Instead, it is a tax on some benefits you may receive from your employer, like a company car, and usually collected through PAYE (pay-as-you-earn).
Is BiK paid before tax?
Yes, BiK is paid before tax is deducted from your salary. In the case of a company car, the vehicle is treated as taxable income, but not directly included in your salary.
How do I report BiK to HMRC?
It is the employer's responsibility to accurately report any Benefit in Kind to HMRC. If you’re an employee and receive a company car as a Benefit in Kind, you’re not responsible for reporting it for tax purposes.