Benefit in Kind

Do you know how much you can save on tax when you get an electric company car?

Previous Situation

Prior to the changes to the Benefit in Kind (BiK) tax on a company electric car it was set at 16%. Unlike the average petrol or diesel vehicle, this is a lower rate. The Benefit in Kind tax rate for an average fossil fuel vehicle is 19% to 37%.

New Situation (from 6th April 2020)

As of the 6th of April 2020 the Benefit in Kind tax on electric company cars has dropped to 0%. As a result, employees and employers will make substantial savings on Tax and National Insurance. The BiK tax will go up to only 1% in 2021 and up again to only 2% in 2022.

What is Benefit in Kind Tax?

Benefits in kind are benefits which employees or directors receive from their employment. However, they are not included in their salary or wages.
To calculate a company car’s BIK: take the P11D value, multiply this value by the car’s company car tax rate (dependent on it’s C02 emissions/km), then multiply this value by your personal tax rate (20%,40% or 45%).

 

Worked Example of Tax Savings for a 20% Tax Payer

 

Please Note: Example Tax Code Used: 1250 / P11D Value: A3 = £37,975 i3 = £37,785.30 / Fuel Benefit Fixed Rate = £24,100.

Worked Example of Tax Savings for a 40% Tax Payer

 
 

Please Note: Example Tax Code Used: 1250 / P11D Value: C63 = £75,333 Tesla = £77,645 / Fuel Benefit Fixed Rate = £24,100.