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 2% rate on pure EVs has been fixed by the UK government until April 2025. 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 2% 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 2% BIK x 40% Income Tax = £320.00/year or £26.67/month

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BIK Rate Examples

 

Please see below for examples of different electric cars and their corresponding BIK payments. Please note that all calculations are estimates and are based on a 40% taxpayer.

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Audi Etron GT EV       £68.27/month

Kia Niro EV                  £26.52/month

MG4 Hatchback EV    £18.70/month

Tesla Model 3 EV        £34.91/month

VW e-Up EV                £17.32/month

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As you can see here, BIK payments on electric vehicles are quite small, however they do increase as the overall value of the vehicle increases. Please see below for examples of other Hybrid and Petrol and Diesel lease cars.

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Audi A3 TDI Diesel              £322.08/month

Nissan Qashqai Hybrid       £337.43/month

VW Golf Plug-In Hybrid      £81.21/month

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As you can see once you move away from both the fully electric and plug-in hybrids car the overall BIK Tax increases making them more expensive to salary sacrifice. The higher the BIK rate the more it eats into the overall salary sacrifice benefit.

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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.