- First work out the taxable BiK value of your car, which you do by multiplying your chosen company car’s P11D value by its BiK percentage rate.
- Then work out the tax you’ll pay annually, by multiplying the BiK value by your personal tax rate.
For a Basic rate taxpayer driving a car emitting 100g/km of CO2, with a P11D value of £30,000, the sums look like this:
- Step one: £30,000 (P11D) x 26% (BiK rate) = £7,800 (BiK value)
- Step two: £7,800 (BiK value) x 20% (Personal tax rate) = £1,560 (Your annual company car tax bill)
Like most tax systems, Benefit-in-Kind rates are subject to change with Budget announcements. And as is usually the way with these things, taxation rates tend to increase over time, although if a Government wishes to promote a certain type of car they can tweak the system to that effect – as is currently the case with electric/zero tailpipe emissions cars.
Company car tax for electric cars
Up until 2021, electric cars attracted zero Benefit in Kind tax, making them an incredibly appealing choice for financially savvy company car drivers. From then on, EVs slotted into the lowest two per cent BiK slot, meaning, while electric fleet drivers did have to pay some tax, it wasn’t anywhere near what those cruising around in petrol and diesel models had to fork out.
However, from the 2025/26 tax year onwards, the BiK rate for EVs will continue to rise by one per cent annually until 2028. The same goes for petrol and diesel cars, with the most polluting vehicles slowly trickling into the top 37 per cent tax bracket.
So is now the time to choose a pure-electric or plug-in hybrid company car?
Yes, if you can. EVs still have the most attractive BiK rates, but plug-in hybrids (PHEVs) also attract less tax. However, with the Government’s latest actions, those incentives are beginning to fade away.
