Company Car Benefit In Kind Taxation
When employees receive a company car they will be taxed on the Benefit in Kind (BIK). The tax paid on the company car BIK is referred to as Company Car Tax (CCT).
What is BIK?
Benefit in Kind (BIK) is a tax that employees must pay when they receive a benefit from their employer that is not included in their salary — such as a company car available for private use. This is often referred to as Company Car Tax.
Each vehicle’s BIK cost will vary depending on several factors:
- The P11D value of the vehicle (its list price including VAT and optional extras)
- The vehicle’s CO₂ emissions
- The employee’s income tax bracket (e.g. 20%, 40%)
The higher the vehicle’s emissions, the higher the BIK percentage — meaning a greater tax charge. This system is designed to encourage the use of lower-emission and electric vehicles.
You can find specific details and examples on how BIK is calculated for cars and vans further down the page or by visiting the relevant subpages.
How is BIK Tax Calculated?
To work out the BIK tax you’ll pay:
- Multiply the vehicle’s P11D value by the applicable BIK percentage (based on emissions).
- Multiply that figure by your income tax rate (e.g. 20% or 40%).
This gives you your annual Company Car Tax.
Divide it by 12 to see how much will be deducted per month.
Are Cars and Vans Treated the Same?
In short, no. There are different calculations for cars, vans and now Pick-Ups.
The pages below explain in more detail how to calculate the Benefit In Kind (BIK) for company cars and vans.
A company car benefit is calculated by multiplying the car's list price (including optional accessories) by the relevant percentage according to the car’s carbon dioxide (CO2) emissions.
Employers National Insurance
When an employee receives a Benefit in Kind (BIK), the employer is also required to pay National Insurance Contributions. This is known as the Employer’s (Secondary) Class 1 National Insurance.
The standard rate for Employer’s Class 1 NIC on BIKs is 15%.
Electric Vehicle Range Figures (Electric Mileage Range/Zero Emission Mileage/Zero Emission Range)
Electric range is the number of miles which is the equivalent of the number of kilometres specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate on the basis of which a car is registered, as being the maximum distance for which the car can be driven in electric mode without recharging the battery.
