Company Electric Car Tax

The ultimate guide to company electric car tax, covering what a company and employee need to contribute.

What is company electric car tax?

Company electric car tax encourages employers and company car drivers to choose vehicles with lower CO2 emissions and was introduced by the UK government in 2002.

Company electric car tax is broken into two parts:

  • What the company has to contribute.
  • What an employee needs to contribute.

What does a company have to contribute?

When a company provides a vehicle to their employees for private use they have to pay company electric car tax.

Company electric car tax is calculated using the car's “P11D value” (the value of the car including VAT, delivery and any extras such as satellite navigation) as well as the CO2 emissions produced by the vehicle.

A "P11D" form is filled out by the employer listing the employee benefits received in the year which is then submitted as end-of-year expenses to the tax office.

What does an employee have to contribute?

When a vehicle is provided by a company and made available to employees for private use, this creates a taxable Benefit-in-Kind (BIK).

Benefit-in-Kind (BIK) is when employees receive perks, other than their income, as part of their remuneration package.

How is Benefit-in-Kind (BIK) 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 Band = BIK value

*For example, an Audi Q7 e-tron has a P11D value of £65,945 and emits 48g/km of CO2, putting it in the 9% BIK rate (percentage banding based on its CO2 emissions).

Therefore, the BIK value is £65,945 x 9% = £5,935

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%):

£5,935 x 20% = £1,187 per year £5,935 x 40% = £2,374 per year £5,935 x 45% = £2,671 per year

You can also calculate this by using the HMRC’s company car and car fuel benefit calculator.

This calculation is based on Audi Q7 P11D value and BIK rate at the time of writing.

BIK Rate for electric vehicles (EV)

Company electric car tax for electric vehicles is currently set at the BIK rate of 7% but as of April 2017 it is set to rise to 9%.

The tables below show the percentage BIK rates depending on vehicle CO2. The table represents electric, petrol and diesel related BIK rates.

Company EV Car Tax BIK Rates 2016-20:

Vehicle CO2 emissions 2016-17 2017-18 2018-19 2019-20
0 g/km 7% 9% 13% 16%
The rates shown are for April 2016 to March 2020 as confirmed in Budget 2015.

BIK Rate for Plug-in hybrid (PHEV)

Some plug-in hybrid (PHEV) company cars are also rewarded for their lower CO2 emissions as they still fall under the lower band 0-50g/km (Audi Q7 e-tron) and therefore receive a reduced BIK rate by at least 4% compared to the 51-75g/km.

Company PHEV Car Tax BIK Rates 2016-20:

Vehicle CO2 emissions 2016-17 2017-18 2018-19 2019-20
0 g/km 7% 9% 13% 16%
51-75 g/km 11% 13% 16% 19%
76-94 g/km 15% 17% 19% 22%
95-99 g/km 16% 18% 20% 23%
100-104 g/km 17% 19% 21% 24%
105-109 g/km 18% 20% 22% 25%
The rates shown are for April 2016 to March 2020 as confirmed in the UK Government's 2015 Budget.

Change to BIK rate by 2020

The above BIK rates for both EV and PHEVs are set to change by 2020. In the autumn budget statement, the UK government announced that in 2020/21 the BIK rate will fall from 16% to just 2%. This is to provide stronger incentives to purchase lower emission vehicles.

While lower emission vehicles are being rewarded, cars emitting greater than 90g CO2/km will rise by 1 percentage point.