BIK Tax Explained
Understanding Benefit in Kind tax on company cars. What it is, how it's calculated, and how to minimise it.
What is BIK Tax?
Benefit in Kind (BIK) is a tax that applies when you receive a non-cash benefit from your employer - such as a company car that you can use for personal trips.
The amount of BIK tax you pay depends on two things: the car's P11D value (its list price including options and delivery, minus the first year's road tax) and its CO2 emissions.
Key Point
Lower CO2 emissions = lower BIK rate = less tax to pay. This is why electric cars are so attractive as company cars.
How to Calculate BIK Tax
The Formula
P11D Value × BIK Rate × Your Tax Rate = Annual Tax
Example Calculation
Electric Car
P11D Value: £45,000
BIK Rate (0g/km): 2%
Taxable Benefit: £900
Tax (20% rate): £180/year
Tax (40% rate): £360/year
Diesel Car (130g/km)
P11D Value: £45,000
BIK Rate: 34%
Taxable Benefit: £15,300
Tax (20% rate): £3,060/year
Tax (40% rate): £6,120/year
The electric car saves over £5,700/year in tax for a 40% taxpayer - that's £475/month!
BIK Rates by CO2 Emissions
| CO2 Emissions | 2024/25 | 2025/26 | 2026/27 |
|---|---|---|---|
| 0g/km (Electric) | 2% | 3% | 4% |
| 1-50g/km | 2-14% | 3-15% | 4-16% |
| 51-54g/km | 15% | 16% | 17% |
| 55-59g/km | 16% | 17% | 18% |
| 60-64g/km | 17% | 18% | 19% |
| 65-69g/km | 18% | 19% | 20% |
| 70-74g/km | 19% | 20% | 21% |
| 75-79g/km | 20% | 21% | 22% |
| 80-84g/km | 21% | 22% | 23% |
| 170g/km+ | 37% | 37% | 37% |
Rates shown are for petrol/hybrid cars. Diesel cars may have a 4% supplement (capped at 37% total).
How to Reduce Your BIK Tax
Choose an Electric Car
With just 2% BIK, EVs are by far the most tax-efficient company cars.
Consider a Plug-in Hybrid
PHEVs with good electric range have lower BIK than pure petrol/diesel.
Avoid Expensive Options
Optional extras increase P11D value and therefore BIK. Only add what you need.
Cash Alternative?
Sometimes a cash allowance works out better - do the maths for your situation.
Find Your Tax-Efficient Company Car
Browse our range of low-emission vehicles and calculate your potential tax savings.