Benefit in Kind Tax and how it works

How is company car tax calculated

The benefit in kind (BIK) is calculated using three pieces of information 

• The price of the vehicle including all added options (P11D)
• How much you earn and the amount of tax you pay
• CO2 emissions of the vehicle, more emissions more tax

As the rules change almost yearly it is always worth keeping up to date with any changes on GOV.UK

How is the BIK Calculated 

You will need the following information as mentioned above to calculate your personal tax liability

• Vehicles P11D value including all options
• Vehicle CO2 emissions, you can get this information from the manufacturers website
• BIK Tax band

The Sum 

So for example, a car with a P11D value of £30,000, with CO2 emissions of 130g/km will have a 25% tax band. 

The calculate your BIK liability follow this simple calculation - £30,000 x 25% (£7500).  To work out what you will pay yearly multiply the £7500 by your personal tax band.  A 20% tax payer will be liable to pay £1500 a year or £125 a month. A 40% tax payer is liable to pay £3000 a year or £250 a month

If you are unsure use the HMRC calculator 

Electric and Hybrid vehicles

The government has introduced very generous savings on BIK for company car drivers of Electric and Hybrid vehicles. These will slowly disappear over the course of time but its worth seriously considering this type of vehicle. Check out our Electric Vehicles here 

BIK for Vans, Pickups and commercial SUVs

Tax rules for vans are slightly different and are based on a flat rate of £3500. You are liable for BIK on LCVs if you drive any personal mileage.  However HMRC have a rule that includes 'insignificant private use' so for example calling to the Doctors during business hours, HMRC sees this as having no discernible 'Benefit in Kind'