Company car tax & benefit-in-kind for EVs
Why benefit-in-kind rates make an electric company car far cheaper than petrol or diesel, and how the published BIK increases change the sums.
For company car drivers, benefit-in-kind tax is the single biggest reason electric cars have taken off. The gap between EV and petrol BIK rates is large enough to outweigh almost every other cost difference.
This guide is a placeholder outline while we finish our full breakdown. The sections below cover what the finished article will explain in detail.
How benefit-in-kind works
You pay income tax on a percentage of the car's list price, set by its CO2 emissions. Zero-emission cars sit in the lowest band, so the taxable amount is a fraction of that for an equivalent petrol or diesel car.
- Taxable benefit = list price x BIK percentage x your marginal tax rate
- Fully electric cars sit in the lowest CO2 band
- Petrol and diesel cars commonly sit several times higher
Scheduled rate increases
EV benefit-in-kind rates rise gradually over the coming tax years. They remain far below petrol and diesel rates throughout, but the advantage narrows, so a long lease should be costed across the full term rather than at today's rate.
Salary sacrifice and BIK
Salary sacrifice schemes work precisely because the salary you give up avoids income tax and National Insurance while the replacement benefit is taxed at the low EV BIK rate.
Charging, fuel cards and reimbursement
Employer-provided workplace charging, home charging reimbursement and the advisory electric rate all have their own tax treatment. Worked examples across tax bands are coming soon.
Put this guide to work
These links jump straight to the part of our tools this guide affects.