Company Car Drivers
Benefit-in-kind (or BIK) is a tax on employees who receive benefits or perks on top of their salary.
If you have a company car for private use, you will have to pay a BIK contribution, or company car tax. Every car has a BIK percentage banding.
As an employee, you pay tax on company benefits like cars, accommodation and loans. Your employer takes the tax you owe from your wages through Pay As You Earn (PAYE). The amount you pay depends on what kind of benefits you get and their value, which your employer works out.
Check your Income Tax to see how company benefits affect the tax you pay.
Some company benefits can be tax-free, like childcare and canteen meals.
You have to pay tax and National Insurance on things that are paid in cash, as they’re treated as earnings.
The latest company car benefit-in-kind tax has a focus on electric vehicles, so fleet managers need to embrace the new drive-chain to limit employees’ tax burden.
Businesses can adopt ‘plug-in’ vehicles as part of their fleet offering to deliver minimum benefit-in-kind tax bills for drivers. But even if, at this stage, fleet managers are unable to adopt electric vehicles, there are tax benefits associated with petrol and diesel vehicles.
For example, opting for an RDE2-compliant model (emissions compliant) or finding alternative ways of travel with the advent of Business Mobility-as-a-Services (BMaaS) will help mitigate the future company car benefit-in-kind tax burden.
Fleet decision-makers need to be thinking ahead and factoring electric vehicles into their long-term fleet management plans.”
Petrol powered and hybrid powered cars for the tax year 2023 to 2024
The tables show the results of the:
- Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
- New European Driving Cycle (NEDC)
These rates will remain frozen until the 2024 to 2025 tax year.
What about vans?
As with road tax, BiK rates are much simpler for vans than cars.
All company vans are charged BiK at the same fixed or flat rate: the 2023/2024 van BiK rate is £3,960. This is an increase of £360 over the previous year, and has gone up in line with the consumer price index.
If you’re a 20% taxpayer, van BiK is £792 per year – £66 per month. If you’re a 40% taxpayer, van BiK is £1,584 per year – £132 per month.
Whether you pay 20% or 40% depends on how much you earn.
Because BiK is a tax on benefits, you only need to pay if it’s a benefit to you – using the van for private journeys. There is some leeway here, such as taking a company van home for the night if you have an early working start in the morning.
BiK for private use of a company van can be avoided if you pay your employer for using the van privately.
If you do have a company van but aren’t able to use it for more than 30 days in a row, this also means you shouldn’t have to pay BiK on it.
