How does Benefit in Kind affect electric cars?
Benefit in Kind (BiK), is often referred to as company car tax. But, the question is, does it affect EVs in the same way as other vehicles?
In this guide to BiK, we chat through:
- What is Benefit in Kind tax?
- How is Benefit in Kind tax calculated?
- What are the different Benefit in Kind tax rates?
- How does Benefit in Kind tax on an electric car compare with a hybrid or petrol car?
- What does the Benefit in Kind increase mean for EV drivers?
- How do I calculate the amount of BiK I’ll pay?
What is Benefit in Kind tax?
Employees pay Benefit in Kind tax on benefits they get from their employer on top of their salary. HMRC treats the benefit separately from your salary, which means you pay the tax before it arrives in your bank account. Any driver who uses a company car for personal use pays BiK tax out of their monthly wage.
How is Benefit in Kind tax calculated?
Benefit in Kind tax is calculated based on two things: the car’s CO2 emissions and the car’s P11D value. The P11D value is the list price of your car, including VAT, combined with any delivery charges (but doesn’t include the car’s first registration fee or annual road tax).
What are the different Benefit in Kind tax rates?
The BiK rates are calculated based on the car’s CO2 emissions.
Here are the key things you need to know about the BiK rates:
- The BiK rates range from 2% for zero and low-emission vehicles, all the way up to 37% for cars that create more pollution
- The BiK rate for electric cars did increase from 1% to 2% from 6th April 2022, and is currently fixed at 2% until April 2025
- From April 2025, the BiK rate will increase by 1% every year until 2028
- The low BiK rate of 2% gives drivers a huge subsidy and employees can make big savings in tax when they switch to an electric car through their employer with salary sacrifice
How does Benefit in Kind tax on an electric car compare with a hybrid or petrol car?
Even with the increase in BiK at 2% for electric cars, the tax is much lower than for hybrids, petrol and diesel cars.
Drivers of hybrid cars can pay BiK rates of up to ten times more than an electric car would pay.
What does the Benefit in Kind increase mean for EV drivers?
If you already have an electric car through your employer you’ll continue to enjoy super low BiK rates - saving money, and the planet, at the same time.
If you’re looking to get a new car through your employer, consider leasing an EV through our salary sacrifice scheme. Not only will you make great savings on BiK rates, but you’ll also save money on fuel, insurance, and much more.
Our electric car salary sacrifice scheme is free for employers to join and can be set up within a matter of weeks.
How do I calculate the amount of BiK I’ll pay?
If you’re a shareholder or company director who's looking to make savings on BiK and fuel costs, an electric car could be the best choice for you. You can get a brand new electric car, plus everything you need to hit the road in it, through your company with Business Contract Hire.