Company Electric Car Tax

The complete guide to company electric car tax, covering what a company and employee need to contribute and how it is calculated.

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.
  • The changes made in April 2020 make pure battery and efficient plug-in hybrid electric vehicles more compelling than ever.

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 pure 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, this 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 incentive for electric vehicle (EV) uptake

With circa 50% of new cars obtained by companies, and because BiK makes a significant difference to an individual’s monthly wages, BiK represents a very potent lever available to government to encourage adoption of the lowest emitting vehicles.

  • In July 2019, following consultation, HM Treasury announced their intent to strongly incentivise full battery electric vehicles (BEVs) using these rates, and offer a more modest incentive on plug-in hybrid electric vehicles (PHEV).
  • With the recent change of BiK rates in April 2020 (all BEVs pay no company car tax in 2020-21, just 1% in 2021-22 and 2% in 2022-23), a further increased uptake of fully electric company cars is to be expected.

Learn more about installing workplace EV charging

Tip: Electricity is recognised as a fuel by HMRC, and advisory fuel rates published at a recommended reimbursement cost of 4p per mile (for pure electric vehicles only - hybrids have AFR rates equivalent to petrol/diesel vehicles).

Incentives for Electric Vans

If your company provides you with a van for personal use, that van is subject to a van benefit charge instead of company car tax. This is currently set at £3,490 for the 2020-21 financial year. Electric vans receive a 20% reduction on the van benefit charge, meaning you will only pay £2,792.

The shift from NEDC to WLTP figures for company car tax

In 2018, the government announced that it will review the impact of WLTP on Vehicle Excise Duty (VED) and company car tax.

  • On the back of this review, the CO2 figures used to calculate tax rates have switched from NEDC to WLTP standard as of 6th of April 2020.
  • WLTP is a test that, when compared to now outdated NEDC, aims to more accurately measure emissions and fuel efficiency.

* 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 is based on the “WLTP” calculation instead of the previously used "NEDC" 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 plug-in hybrid electric cars) and using WLTP figures. The table represents electric, petrol and diesel related BiK rates. 

The BiK rates are frozen at the 2022-23 level for an additional 2 years, meaning for zero emission vehicles you'll pay 2% until 2025.


Vehicle CO2 emissions
BiK rate
(Electric, Petrol, RDE2 Diesel)

2020-21

2021-22

2022-23

0 g/km

0%

1%

2%

1-50 g/km (electric range >130 miles)

0%

1%

2%

1-50 g/km (electric range 70-129 miles)

3%

4%

5%

1-50 g/km (electric range 40-69 miles)

6%

7%

8%

1-50 g/km (electric range 30-39 miles)

10%

11%

12%

1-50 g/km (electric range <30 miles)

12%

13%

14%

51-54 g/km

13%

14%

15%

55-59 g/km

14%

15%

16%

60-64 g/km

16%

17%

18%

65-69 g/km

16%

17%

18%

70-74 g/km

17%

18%

19%

75-79 g/km

18%

19%

20%

80-84 g/km

20%

21%

22%

85-89 g/km

20%

21%

22%

90-94 g/km

21%

22%

23%

95-99 g/km

22%

23%

24%

100-104 g/km

23%

24%

25%

105-109 g/km

24%

25%

26%

110-114 g/km

25%

26%

27%

115-119 g/km

26%

27%

28%

120-124 g/km

27%

28%

29%

125-129 g/km

28%

29%

30%

130-134 g/km

29%

30%

31%

135-139 g/km

30%

31%

32%

140-144 g/km

31%

32%

33%

145-149 g/km

32%

33%

34%

150-154 g/km

34%

35%

35%

155-159 g/km

34%

35%

36%

160-164 g/km

35%

36%

37%

165-169 g/km

36%

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 Benefit in Kind (BiK) Tax is calculated

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 6th April 2020

A new Nissan LEAF 40kWh has a P11D value of £29,790 and (as a BEV) emits 0g/km of CO2, putting it in the 0% BiK band (percentage rate based on its CO2 emissions).

Therefore, in 2020-21, the BiK value will be £29,790 x 0% = £0

In 2021-22, the BiK value will be £29,790 x 1% = £297.90

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%):

    • £297.90 x 20% = £59.58 per year / £4.97 per month
    • £297.90 x 40% = £119.16 per year / £9.93 per month
    • £297.90 x 45% = £134.06 per year / £11.17 per month

    In 2022-23, the BiK value will be £29,790 x 2% = £595.80

    • £595.80 x 20% = £119.16 per year / £9.93 per month
    • £595.80 x 40% = £238.32 per year / £19.86 per month
    • £595.80 x 45% = £268.11 per year / £22.34 per month

    It is clear that the difference in BiK rates for employees is very significant for electric cars, when compared with a conventionally fuelled equivalent.

    Comparison of ICE vs BEV Saloon for Executive from April 2020

    Vehicle

    Tesla Model S Performance

    Mercedes S 500 L Grand Edition

    P11D Value
    (based on list prices on car configurators)

    £96,790

    £87,490

    0-60 mph

    2.3 seconds

    4.8 seconds

    Emissions

    0 gCO2 /km

    187 gCO2 /km

    BiK Rate

    2%

    37%

    2020-21 monthly BiK cost @40% tax rate

    £96,790

    x 0% x 40% / 12

    £0 per month

    £87,490

    x 37% x 40% / 12

    £1,079.04 per month

    2021-22 monthly BiK cost @40% tax rate

    £96,790

    x 1% x 40% / 12

    £32.26 per month

    £87,490

    x 37% x 40% / 12

    £1,079.04 per month

    2022-23 monthly BiK cost @40% tax rate

    £96,790

    x 2% x 40% / 12

    £64.53 per month

    £87,490

    x 37% x 40% / 12

    £1,079.04 per month


    Which vehicle would you choose?

    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.

    Benefit in Kind (BiK) rates for cars registered before April 2020

    The table below shows the percentage BiK rates, depending on vehicle CO2 emissions from conventional fuel (only >0 for plug-in hybrid electric cars) and using NEDC figures. The table represents electric, petrol and diesel related BiK rates.


    Vehicle CO2 emissions
    BiK rate
    (Electric, Petrol, RDE2 Diesel)

    2019-20

    2020-21

    2021-22

    2022-23

    0 g/km

    16%

    0%

    1%

    2%

    1-50 g/km (electric range >130 miles)

    16%

    2%

    2%

    2%

    1-50 g/km (electric range 70-129 miles)

    16%

    5%

    5%

    5%

    1-50 g/km (electric range 40-69 miles)

    16%

    8%

    8%

    8%

    1-50 g/km (electric range 30-39 miles)

    16%

    12%

    12%

    12%

    1-50 g/km (electric range <30 miles)

    16%

    14%

    14%

    14%

    51-54 g/km

    19%

    15%

    15%

    15%

    55-59 g/km

    19%

    16%

    16%

    16%

    60-64 g/km

    19%

    17%

    17%

    17%

    65-69 g/km

    19%

    18%

    18%

    18%

    70-74 g/km

    19%

    19%

    19%

    19%

    75 g/km

    19%

    20%

    20%

    20%

    76-79 g/km

    22%

    20%

    20%

    20%

    80-84 g/km

    22%

    21%

    21%

    21%

    85-89 g/km

    22%

    22%

    22%

    22%

    90-94 g/km

    22%

    23%

    23%

    23%

    95-99 g/km

    23%

    24%

    24%

    24%

    100-104 g/km

    24%

    25%

    25%

    25%

    105-109 g/km

    25%

    26%

    26%

    26%

    110-114 g/km

    26%

    27%

    27%

    27%

    115-119 g/km

    27%

    28%

    28%

    28%

    120-124 g/km

    28%

    29%

    29%

    29%

    125-129 g/km

    29%

    30%

    30%

    30%

    130-134 g/km

    30%

    31%

    31%

    31%

    135-139 g/km

    31%

    32%

    32%

    32%

    140-144 g/km

    32%

    33%

    33%

    33%

    145-149 g/km

    33%

    34%

    34%

    34%

    150-154 g/km

    34%

    35%

    35%

    35%

    155-159 g/km

    35%

    36%

    36%

    36%

    160-164 g/km

    36%

    37%

    37%

    37%

    >165

    37%

    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.

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