If you work for a business or company, you may be given a company car by your employee. A company car makes it easier for employees who have a family or no car of their own to commute to work and for personal use. Sounds pretty good, right?
With a company car comes a price. This extra benefit is known as a benefit in kind tax (BIK). The cash value of the car is added onto your salary meaning that your tax may rise if the addition of the value of the company car takes you above a tax threshold. The amount of tax you have to pay depends on:
Therefore, BIK can have a large impact on your monthly wage.
If your company provides you with an electric car, then CO2 emission is not a consideration, as one of the benefits of electric cars is theyâ€™re much better for the environment. Therefore being given an electric vehicle as a company car would probably be cheaper overall than if you were given a petrol or diesel, as they both produce greenhouse gases. Also, electric cars are considerably cheaper to run in general than cars using non-renewable fuels. Because of this, BIK helps the government to encourage more low emitting vehicles on the road.
With the change in BIK rates in April 2020 stating that fully electric vehicles pay no company car tax in 2020 - 2021 (2021 - 2022 being 1% and 2022 - 2023 being 2%), the rise of fully electric cars is sure to increase dramatically, especially now that theyâ€™re becoming more popular, accessible and in demand.
|Hyundai Kona||Hyundai Kona Electric|
|Registration date/ standard||Registered from 06 April 2020 - WLTP||Registered from 06 April 2020 - WLTP|
|Tax Year 2020/21|
|Tax Year 2021/22|
|Tax Year 2022/23|
|Total tax 2020-23|
As you can see, despite having a higher P11D, the Hyundai Kona Electric's total tax from 2020 to 2023 is significantly lower than the non electric model.
To calculate the BIK tax on your car, you need to base it on the carâ€™s CO2 emissions (None if electric)
Your BIK percentage band is based on your car's CO2 emissions. Therefore, if youâ€™re using a pure electric vehicle, this will be 0%. Therefore, company car drivers can save a great deal if theyâ€™re driving an pure EV or even a hybrid.
Pure battery vehicles are exempt from road tax because it is calculated based on the CO2 tailpipe emissions, and pure electric cars emit no CO2.
Plug in hybrids, however, do have to pay road tax, but it is reduced from other fuel types. Theyâ€™re likely to cost between Â£0 and Â£100 depending on the CO2 emissions.
So with no road tax to pay and BIK dramatically reduces for pure electric cars, itâ€™s no wonder electric cars are getting increasingly popular as business cars.