BIK rates and Company Car Tax

On this page you will find details how car taxation effects the employee, P11D, Co2 emissions, Benefit in Kind taxation (BIK)

The government works closely with the vehicle manufacturers to provide the latest Fuel Consumption and CO2 Emissions figures for all of the vehicles currently available.

Under the current system , Company and employee company car tax are both based on a percentage of the official price of the car . This is referred to as the P11D value. The percentage being primarily determined by the cars CO2 emissions. For the employee , the Benefit in kind (BIK) is then calculated at the appropriate personal tax rate. This is usually collected via PAYE.

The P11D value includes the list price of the car, delivery charges and any optional extras including metallic paint. Road Fund Licence and 1st Registration Fee are excluded . The official CO2 should then be rounded down to the nearest band, see below, and the percentage obtained. Currently there is a 3% surcharge for all diesel engine cars but this is under review.

Company Car BIK Rates 2024- 2028

Please see below for tax tables up to April 2028*. After April 2025, the company car tax rates on EVs will increase by 1% pa for 3 years. The rates will be 3% for 2025/26, 4% for 2026/27 and 5% for 2027/28. The company car tax rates for ultra-low emission cars (non EVs) emitting less than 75g/km will also increase by 1% from April 2025 for 3 years, rising to a maximum of 21%.


Company Car Tax BIK Rates April 2024 to 2028

Vehicle CO2 (g/km) Electric range (miles) 2023-24 (%) 2024-25 (%) 2025- 26 (%) 2026-27 (%) 2027-28 (%)
0 N/A 2 2 3 4 5
.1 – 50 >130 2 2 3 4 5
.1 – 50 70-129 5 5 6 7 8
.1 – 50 40-69 8 8 9 10 11
.1 – 50 30-39 12 12 13 14 15
.1 – 50 <30 14 14 15 16 17
51-54 15 15 16 17 18
55-59 16 16 17 18 19
60-64 17 17 18 19 20
65-69 18 18 19 20 21
70-74 19 19 20 21 21
75-79 20 20 21 21 21
80-84 21 21 22 22 22
85-89 22 22 23 23 23
90-94 23 23 24 24 24
95-99 24 24 25 25 25
100-104 25 25 26 26 26
105-109 26 26 27 27 27
110-114 27 27 28 28 28
115-119 28 28 29 29 29
120-124 29 29 30 30 30
125-129 30 30 31 31 31
130-134 31 31 32 32 32
135-139 32 32 33 33 33
140-144 33 33 34 34 34
145-149 34 34 35 35 35
150-154 35 35 36 36 36
155-159 36 36 37 37 37
160-164 37 37 37 37 37
165-169 37 37 37 37 37
170+ 37 37 37 37 37





















Car tax for electric cars and plug-in hybrids?

The BIK tax depends on your electric vehicle and the rates tend to change each tax year.

Electric cars and some plug-in hybrids have a more favourable BIK rate because of their zero or low CO2 emissions.

For 2020/2021 fully electric cars benefitted from a zero per cent company car tax rate because of their zero emissions.

This figure for electric vehicles grew to one per cent for 2021/2022 and two per cent for 2022/2023.

New BIK tax bands came in for plug-in hybrid cars with CO2 emissions of between 1-50g/km, depending on the car and official electric-only range.

There’s now not a huge amount of difference between the company car tax rates for a petrol/diesel vehicle and a plug-in hybrid with a zero emissions range of under 30 miles. This is due to the Government trying to further incentivise drivers to choose EVs and hybrids with greater zero emission ranges.

The UK government confirmed the company car tax rates up until April 2028 as part of the autumn statement in 2022.

EVs with a range of over 130 miles will continue to be taxed at 2% from April 2024. However, this will start to increase from April 2025 rising by 1% each year over the next three years.

This is to reflect how the EV market is growing. While it does mean EV drivers will see a gradual increase in how much company car tax they will be paying, importantly, they will still be paying a lot less than petrol and diesel car drivers – with the most polluting vehicles with over 170g/km CO2 taxed at a rate of 37%.

How to calculate company car fuel benefit?

To calculate how much fuel benefit you’ll have to pay, you need to calculate the vehicle’s benefit in kind with a fuel charge multiplier.

The benefit in kind or BIK tax is evaluated by multiplying the car’s CO2 emission level, the value of the car when new – including any modifications – and your income tax bracket. If you’re unsure how to calculate your tax rate, please contact us.

To work out if the company car fuel benefit is worth it, make this calculation to see how much tax you’ll need to pay annually:

Your BIK percentage multiplied with £23,400 for the 2019/2019 tax year. This car tax multiplier can change each year and the rate is controlled by HMRC.


If your BIK percentage was 25%, as your petrol vehicle falls into the 105-109 CO2 bracket, then you’d multiply 25% by 23,400 to reach £5,850.

Reduce the £5,850 figure by multiplying it by your tax margin, which is typically either 20% or 40%.

£5850 x 20% = £1170 tax payable.

If you are spending under £1170 a year on fuel then the car fuel benefit is perhaps not worth it, as you’d still have to pay the calculated amount.

Is it worth it?

This all depends on how many miles you’re clocking up on your company car.

If you are on average paying out more for fuel than the car fuel benefit amount, then having a company car and receiving free fuel is worth it. But, if you don’t spend that much on fuel, then you’d actually be paying more with this benefit.

Opting out of the Company Car

By going down this route you have no taxable BIK and hence save yourself the taxation every month, your salary cheque will be larger due to less tax payable but you do not have a car!

Your employer will usually offer you additional salary to compensate and could also offer you ‘pence per mile’ (PPM) for your business mileage. This amount could vary between just sufficient to cover the cost of the actual fuel used or could be more generous and would in fact make a contribution to the running costs. The added salary will be taxable but the PPM payment for business mileage is tax free up to certain limits set by the Inland Revenue each year. These are known as Approved Mileage Allowance Payments.

Remember! Now you don’t have a company car it will be down to you to purchase, maintain and service the car. You will also have to pay the Road Fund Licence and insurance (this will also have to cover you for business use). You will have to pay the financing charges and suffer the loss in value over the period, purchase tyres, roadside assistance and of course the fuel itself. Don’t underestimate the cost of all of this. Although you will be saving benefit in kind tax, this, along with your net salary increase and any contribution via payment for business mileage, will need to cover all these costs.

Approved Mileage Allowance Payments (AMAP’s)

These are the maximum amounts that can be received without paying tax or NIC. If you receive less than the stated maximums the difference can be claimed as Mileage Allowance Relief. This can be done within your self-assessment tax return at the end of the tax year but can also be built into your tax code, so that you receive the benefit now.

Currently the maximum amounts you can receive tax-free are:

Car Taxation – Employer

By offering a company car to any employee earning more than £8,500 pa or any director, it will mean that they will incur a taxable Benefit in Kind (BIK) – for further details see Car Taxation – Employee, as an alternative you could offer your employees an increase in salary to ‘opt out’ and purchase their own cars, this could mean the company makes savings on:-

  • Time spent on purchasing and managing the fleet
  • Administration and tax reporting
  • Class 1A NIC on the Benefit in Kind
  • Acquisition and funding cost
  • Maintenance and servicing costs as well as Road Fund Licence and Insurance

But you have to consider what will you need to offer your employees:

Additional salary – the net amount after tax, plus the savings they will make by not paying Benefit in Kind tax will need to be sufficient for them to fully run a car on contract including maintenance, insurance etc. to be able keep them as satisfied employees.

We find most employees ‘dissatisfaction’ with any company car scheme is the fact that they feel they are paying too much tax – most forget that the Inland Revenue would most probably take as much, if not more, from any increase in salary – a well researched lower emission vehicle may be all that is required to halve their tax bill as well as reduce your NI bill and possibly increase the amount of Capital Allowances you can offset against Corporation Tax.

Free Fuel

Are you still offering this to your employees? Are you aware how much this costs, the driver and you? The Government have purposely made this benefit very expensive as they feel this encourages driving unnecessary miles and hence increases Co2 and your carbon footprint. In practice it could be cheaper for your employee NOT to have free fuel, straight away dramatically decreasing these tax bills and could also save you all the cost of the fuel and National Insurance!

Health and Safety regulations mean that you, as the employer, are still legally responsible for the safety of their car. How will you check that the car is safe and regularly serviced? As well as the implications of the Corporate Manslaughter and Corporate Homicide Act

Please feel free to contact us to discuss your options.

Vat Taxation

Anyone whose personal use of a van is purely incidental, does not have to pay any BIK.
If personal use is allowed you will then pay tax based on a flat rate BIK of £3,000 plus £564 if you receive free personal fuel.

Incidental use is not 100% clarified by the Inland Revenue but, for instance, whereas parking your company car at home (where you at least have the ability to drive on personal use) would involve a BIK charge, driving your company van between home and work will not incur a charge.

The definition of commercial vehicle always used to be clear cut – 1 row of seats and no side windows behind the driver. When double cab pick-ups and vans entered the market, for a time, technically, they would not have been seen as commercial vehicles.

In 2000 this was clarified and they are now classed as a commercial vehicle even with rear seats and side windows, as long as they have the ability to carry 1 tonne, (all double cabs in the UK will have been built to this criteria) and are built primarily to carry goods rather than passengers.

Vehicles and Vat

On this page you will be able to find information regarding cars and commercials (vans) and the effect on them of VAT. This page will cover the basics, for any more complicated questions please feel free to telephone us.


When someone purchases a car, VAT is included in the price @20%. Unless you can prove to the Inland Revenue that the vehicle is used 100% for business use, no VAT is reclaimable. 100% business use is not easy to prove and is normally only achieved by such businesses as driving schools and self-drive hire companies etc. A comprehensive mileage log needs to be maintained showing every trip, the vehicle must be a pool car and can’t be allocated to one individual and the vehicle must always be kept at the business premises i.e. never stored at the directors or employees home.

These rules affect all methods of purchase where ownership is gained, or can be, i.e. payment in cash, bank or other loan, Hire Purchase (HP) fixed or variable rate Balance Payments, Lease Purchase (LP), Personal Contract Purchase (PCP), Contract Purchase (CP).

When a vehicle is leased the leasing company purchases the car – obviously they will not use the car personally so for them it is 100% business use and they will reclaim the VAT. When you lease from them they will calculate the figures based on the pre-VAT price and then charge you VAT on the monthly rentals.

Inland Revenue rules allow 100% reclaim of VAT on leased vehicles for 100% business use but they will also allow 50% VAT reclaim even if there is personal use – this can be a major benefit being able to claim 50% of the VAT which you couldn’t claim back if the car was purchased.

These rules affect all methods of Leasing – long term rental – where the hirer can never gain ownership, i.e. Finance Lease, also known as: Leasing, Car Leasing, fixed period Lease, Lease, Lease Hire, Lease Rental – many names for the same thing, and Operating Lease, which, for vehicles, is always referred to as Contract Hire.

Commercial Vehicles

Historically a commercial vehicle was defined as having one row of seats, no windows behind the driver and predominantly used for the delivery of goods. Double Cab Pickups and vans broke this rule and for some time they were defined as passenger cars. This has now been clarified and they are now classed as commercial vehicles as long as they have a carrying capacity of at least 1 tonne and are built to primarily carry goods rather than passengers.

Irrespective of whether you purchase a van and ownership is gained (using cash or loan, Hire Purchase – HP, fixed or variable rate Balance Payments, or Lease Purchase – LP) OR Lease a van using Finance Lease or Contract Hire, you can claim 100% of the VAT.

You should note that Her Majesty’s Revenue and Customs (HMRC) can restrict the percentage of VAT you claim on a commercial vehicle to the actual percentage of business to total miles – this can be particularly important to drivers of Double Cabs.

Purchase / Lease Any Personal use 100% Business use
Purchase of a car – Cash – HP – LP etc NIL 100%
Lease of a car 50% 100%
Purchase of a commercial vehicle 100%* 100%
Lease of a commercial vehicle 100%* 100%

Please Note:

  • Inland Revenue can limit the percentage claimed in relation to percentage of business use, perhaps particularly important for users of Double Cabs.

All information can be obtained from Inland Revenue. E&EO

Information obtained from

All information on this page is for illustration only. ecofleet accept no liability / responsibility regarding the contents of this page. E &EO

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