Benefit In Kind (BIK) is a tax on employees who receive benefits or perks on top of their salary. If you have a company car that is available for private use, this means you will have to pay a BIK contribution. All vehicles have a BIK percentage banding which is based on their CO2 emissions, plus a P11D value which is the list price of the vehicle including extras, delivery costs and VAT, but excludes the first year registration fee and Vehicle Excise Duty (VED) road tax.
The least polluting company cars are electric vehicles which attract a 13% BIK rate in tax year 2018/19, 16% in 2019/20 and reduces to 2% from April 2020. While the highest polluting vehicles are taxed at a maximum rate of 37% BIK. As a driver you should take into account the CO2 of the vehicle when placing your order. The lower the CO2 emissions the lower BIK tax you pay –it’s better for the environment and will reduce fuel costs.
Petrol vs Diesel? Modern diesel engines are some of the cleanest and most efficient available, however in the UK most diesel vehicles incur a 4% BIK surcharge added over petrol models with similar emissions –unless it is classed as an ‘RDE2 Compliant’ diesel(see overleaf). RDE2 diesel vehicles only started to arrive in the UK from early 2019 and they’re something to look out for over the next few years due to the 4% BIK saving they provide as they are exempt from the diesel surcharge.
Indicative CO2 what you need to know When ordering your vehicle the CO2 supplied to you on the quote is purely indicative. It is only when we receive the V5 document for the vehicle that the actual CO2 for the vehicle is fully confirmed. You should also be aware that in general the BIK rates change every year. This is shown in the table overleaf. How is BIK calculated and how much will I pay? The amount of company car tax you pay is dependent on your annual salary. For example, if you’re in the 20% income tax bracket, you will pay 20% of the taxable portion of the car’s P11D value.
To calculate your BIK tax, multiply the P11D value of the vehicle by the BIK percentage banding, then multiply this figure by your tax band. An easy to use Tax Calculator will enable you to calculate your BIK: http://cccfcalculator.hmrc.gov.uk/CCF0.aspx