Understanding BIK Benefit in Kind

What is a Benefit In Kind Tax (BIK)

 

Benefit in Kind is occasionally referred to as company car tax. When discussing a car lease the BIK is the amount of tax you pay for having the vehicle as an employment benefit.​

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The current 3% rate on pure EVs has been fixed by the UK government until April 2026. After this BIK will be increased by 1% each year until 2028. This is great news for anyone considering a salary sacrifice as it gives assurance that all-electric vehicles will maintain their cost-effectiveness for the foreseeable future.

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How is Benefit In Kind Calculated

 

The Benefit in Kind is calculated upon two factors, the car's P11D or the total value of the vehicle and the CO2 emissions related to that specific lease car. The lowest BIK rate is 3% for all-electric vehicles and increases on a sliding scale to 37% for high-pollution vehicles. Once you know the P11D of the vehicle you then multiply it by the BIK Percentage and then multiply it by your Income Tax bracket. Please see an example calculation below.

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£40,000 P11D Value x 3% BIK x 40% Income Tax = £480.00/year or £40.00/month

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​For more information or help calculating your salary sacrifice and potential benefit in kind tax please call the SalSac team on 0330 174 6768 today.