BIK – Benefits-in-kind
Benefits provided by your employer that are not included in your wages such as a company car or private medical insurance paid for by your employer.
Company Car BIK Tax
If you are entitled to a company car through your employer that allows you to use the vehicle for private use, then you may be liable to pay the BIK Tax.
There are, however, a few exceptions to this rule, for example, someone who earns less than their personal tax allowance would not be liable for BIK Tax.
The P11D Value is how HMRC reference the cars list price
The CO2 Emissions the vehicle emits
You will be liable if: The car will be used for personal use. This includes taking the car home on evenings and weekends and driving to and from your place of work.
You will not be liable if: The car is for business use only, will not be used privately and is not available for private use.
Work out how much BIK tax you are liable to pay on your chosen vehicle:
You will need:
Note: If you are a high rate earner with an expensive company car that is high in CO2 emissions then you will pay the most in BIK Tax. On the other hand, if you choose a lower priced car with low fuel emissions you can actually reduce your tax liability.
BIK Tax Value = (P11D x BIK Tax Band) x Personal Tax Band
BIK tax bands are currently capped at a maximum of 37% however
these are adjusted year on year.
You can see the current Bik Tax banding below:
|Cars registered before 6 April 2020:|
|Electric range |
|Cars registered from 6 April 2020:|
*All diesel cars face a 4%
surcharge; however, a diesel car is still usually the best option for high
mileage drivers, you may be able to recover the difference in the savings on
Note: You may be eligible for a reduced BIK car tax rating if you only use your company car part time. You can find out more about this on the HMRC website.
Say you were offered a XC40 R-Design Pro T5 Twin Engine Automatic as a company car (BIK)
The P11D value of that car is £42,305, the car emits 43g/km of CO2, therefore the BIK tax band is 8% for the 2020/2021 financial year.
£42,305 x 8% = BIK taxable value of £3384.40
If you pay 20% personal income tax then
£3384.40 x 20% = £676.88 (the amount of annual BIK tax you would pay).
If you are part of a salary sacrifice scheme, you may exchange part of your salary to be eligible for company car benefits.
If you decide to take this option, then you will have to pay income tax on either the value of the car OR the amount of salary sacrificed (the tax will apply to the greater of the two). You will also pay national insurance on top of this.
At Volvo North East Business Centre, we want a business deal that is right for you and your employer.
We can offer advice to help you ensure you get the right car at the right price and answer any questions you may have to help find the right car for you.
Why not contact our team on 0191 516 8203 to speak with a member of the team to find out more, or fill in the form below?