The Benefit In Kind (BIK) rates for EVs play a significant role in determining the taxable benefits received from a company car. These rates are set by HMRC to encourage the adoption of EVs in the UK.
The current Benefit In Kind (BIK) rate in the UK is 2% for electric vehicles, increasing gradually by 1% a year to reach 5% in 2027/2028.
In this comprehensive guide, we will explore the details of BIK rates for EVs, including how they are calculated, the factors influencing the rates, and the impact on individuals and businesses. We will delve into the current BIK rate structures, and exemptions, highlighting the potential tax advantages of opting for an EV.
What are the Benefit in Kind (BIK) rules for Electric Vehicles?
Benefit in Kind (BIK) tax rules for electric vehicles EVs in the UK are significantly favourable compared to petrol or diesel vehicles. The BIK tax is determined as a percentage of the vehicle’s value, with the rate set by the government.
Until 2024, the BIK rate for EVs is set at 2%. This rate is expected to increase incrementally by 1% each year, reaching 3% in 2025/26, 4% in 2026/27, and capping at 5% in 2027/28.
These rates are considerably lower than for non-EVs, making EVs an appealing option for company car drivers and employers alike, due to potential savings in tax liability.
What does Benefit in Kind (BIK) mean?
Benefit in Kind (BIK) refers to the non-cash benefits an employee receives from their employer in addition to their salary, which is taxable. These benefits can range from private medical insurance to company cars, and they are considered as ‘in kind’ because they are not cash, but they have a cash value.
When it comes to leasing electric company cars, the BIK is essentially the amount of tax the employee must pay for having access to the car. The value of the BIK for the company car is calculated based on several factors including the car’s list price, the fuel type, and its CO2 emissions. The lower the emissions, the lower the BIK rate, which is why electric vehicles often have much lower BIK rates than petrol or diesel vehicles.
Benefit in Kind is calculated and added to an employee’s taxable income, this means that tax is correctly paid on the value of the benefit they have received. The employer may also be responsible for paying additional National Insurance contributions on the value of the benefit provided.
How are Benefit in Kind (BIK) rates for EVs determined?
Benefit in Kind (BIK) rates are determined by the UK Government. They are regularly reviewed and changed often to make sure they are offering the right level of incentive to encourage companies to use Electric company cars within their fleets.
The rates are primarily influenced by the CO2 emissions and zero-emission mileage of the EV.
In the UK, the BIK rates for company cars are typically reviewed and updated annually, with the rates applicable for each tax year. The government aims to incentivize the adoption of EVs by offering more favourable tax treatment. The rates are designed to encourage individuals and businesses to choose cleaner vehicles and support the country’s climate change goals.
BIK rates can vary from year to year, and the government adjusts them periodically to align with their environmental targets and tax policy objectives. Here are the latest BIK rates from HM Revenue and Customs:
Historic and future UK Benefit in Kind (BIK) rates
The current electric car Benefit in Kind (BIK) rate for the year 2023 is 2%. This means that users of electric company cars will be liable to pay tax on 2% of the vehicle’s list price. (with the exception of commercial electric vans which are at a 0% rate).
The table below shows the historic rates starting in 2012 and the planned rates all the way up to 2027/28.
|UK Tax Year||EV BIK rate|
Looking at the historic trend of BIK rates for electric cars, there’s a gradual increase in rates over time, particularly from 2015 to 2017, when the rates rose from 5% to 7%.
However, since then, the rates have fluctuated and even dropped to 0% for certain years (2019/20 and 2020/21). This decrease in rates is due to the government’s efforts to incentivize the adoption of electric vehicles. The government plans to increase rates gradually in the future, which reflects the ongoing commitment to encourage businesses and the general public to choose electric vehicles over petrol or diesel.
How does the BIK rate for EVs compare to petrol cars?
The Benefit-in-Kind (BIK) rates for electric cars are generally lower compared to petrol cars. The BIK rate for a company car is determined based on factors such as the vehicle’s list price, CO2 emissions, and fuel type.
For example, as of the 2023/24 tax year, the BIK rate for EVs is set at 2%, while petrol cars typically have higher BIK rates. Petrol cars can have BIK rates that range from 16% to 37% depending on their CO2 emissions. The exact BIK rate for a petrol car depends on the specific emissions level and the tax year.
What about the Benefit In Kind (BIK) rates for hybrid cars?
The Benefit-in-Kind (BIK) rates for hybrid cars vary depending on the specific type of hybrid and its CO2 emissions.
Hybrid vehicles combine an internal combustion engine with an electric motor, offering improved fuel efficiency and reduced emissions compared to conventional petrol or diesel cars. However, the BIK rates for hybrids can be higher than those for pure electric vehicles (EVs) due to their partially fossil fuel-dependent nature.
The BIK rates for hybrid cars are determined based on their CO2 emissions, and the rates can vary across different tax years. Generally, hybrid cars with lower CO2 emissions have lower BIK rates, while those with higher emissions attract higher rates. Also, there are different types of hybrids, such as self-charging hybrids and plug-in hybrids (PHEVs).
PHEVs have the ability to be charged from an external power source, offering a greater electric driving range and lower emissions. Consequently, PHEVs often have more favourable BIK rates compared to self-charging hybrids.
The table below lists the current BIK rates and bands for EV, Hybrid and Petrol Vehicles in the UK:
|CO2 Emissions in g/km||EV range in miles||BIK rate %|
|0 (Zero emission EV)||Any||2%|
|1 to 50 (Hybrid)||>130||2%|
|1 to 50 (Hybrid)||70 to 129||5%|
|1 to 50 (Hybrid)||40 to 69||8%|
|1 to 50 (Hybrid)||30 to 39||12%|
|1 to 50 (Hybrid)||< 30||14%|
|51 to 160 (Petrol or Diesel)||N/A||15% to 36% range|
|160+ (Petrol or Diesel)||N/A||37%|
Overall, this BIK rate structure promotes the adoption of EVs, as they receive the most favourable rates, followed by hybrids, and then petrol or diesel vehicles.
Does the BIK rate for EVs change depending on the size or type of car?
No, the Benefit-in-Kind (BIK) rate for EVs in the UK does not change based on the size or type of car. The BIK rate for EVs is primarily determined by the vehicle’s CO2 emissions and electric range, rather than its size or specific type.
The BIK rate for EVs is set regardless of the size or type of the vehicle. This rate applies uniformly to all eligible EVs, whether they are compact cars, sedans, SUVs, or other body types. By applying a consistent and lower BIK rate across all EVs, regardless of size or type, the UK government aims to encourage individuals and businesses to adopt electric vehicles over ICE cars.
Do BIK rates vary based on the age of the EV?
No, BIK rates for electric vehicles do not vary based on the age of the vehicle. The age of an EV is not a determining factor in calculating the BIK rate. Instead, BIK rates for EVs are primarily based on factors such as the vehicle’s CO2 emissions (if hybrid), electric range, and the specific tax year.
Can companies provide EV charging as part of their BIK tax arrangements?
Companies can provide electric EV charging as part of their Benefit-in-Kind (BIK) tax arrangements. In fact, there is no BIK cost associated with the provision of EV charging points in the workplace. This means that employers can offer charging to their employees without incurring additional tax liabilities.
To further support companies in adopting EV charging facilities, the UK government has introduced the Workplace Charging Scheme. This scheme provides a grant to eligible businesses that are actively looking to install EV charging points in the workplace.
The grant aims to offset a portion of the upfront costs associated with installing charging infrastructure, making it more financially feasible for companies to provide this service to their employees.
How to work out your BIK tax liability for an EV?
To work out your Benefit-in-Kind (BIK) tax liability for an electric vehicle, you can follow these steps:
- Determine the P11D value
The P11D value represents the list price of the EV, including any optional extras but excluding the government Plug-in Car Grant. This value can be found on your vehicle’s registration documents or by consulting the manufacturer or dealer.
- Consider the BIK rate
The BIK rate for EVs is determined by the government and varies depending on the tax year. You can find the applicable BIK rate for your specific tax year from HM Revenue and Customs (HMRC) or other reputable sources.
- Calculate the taxable value
Multiply the P11D value by the BIK rate to obtain the taxable value. For example, if the P11D value is £30,000 and the BIK rate is 2%, the taxable value would be £600 (£30,000 x 0.02).
- Deduct any employee contributions
If you contribute towards the cost of the vehicle or its private use, you can deduct these contributions from the taxable value. This reduces your BIK tax liability.
- Apply your personal tax rate
The taxable value, after accounting for any employee contributions, is added to your other taxable income. Your BIK tax liability is then calculated based on your personal tax rate. This rate depends on your total income and tax bracket.
- Report and pay the tax
Ensure that you accurately report your BIK tax liability on your self-assessment tax return or through your employer’s payroll system. Pay any tax due within the prescribed deadlines.
What is the P11d benefit on electric cars?
The P11D benefit on electric cars refers to the taxable value associated with a company car provided to an employee by their employer. This term is derived from the P11D form, which serves as the official document for reporting and calculating the taxable benefits and expenses received by employees.
For electric vehicles, the specific P11D benefit is determined based on the government’s current BIK rate, which is set at 2%. This rate applies to the taxable P11D value of the electric car provided by the employer to the employee.
It’s important to note that the P11D benefit is not the same as the “Benefit in Kind” itself. Instead, it is the means by which employers report and provides information on the benefits in kind received by their employees.
The P11D form allows employers to list and submit details of the benefits in kind, enabling the calculation of the associated tax and national insurance contributions owed by the employee. So the P11D form serves as a reporting mechanism for Benefit-in-Kind liabilities. Remember the BIK contribution applies to both company cars provided by your workplace in order to complete your daily job AND electric cars on a salary sacrifice scheme.
It plays a crucial role in accurately determining the taxable value of the company car provided to an employee, including electric cars, in compliance with HMRC regulations.
What are the Benefit in kind rules for Electric fuel cards?
Fuel cards are a fairly common employment benefit in the UK, the rules around tax treatment are complex and dependent on a few varying factors, including the type of fuel card and how it is used. You can read the government rules on fuel cards here.
The BIK rules for electric fuel cards are dependent on whether the fuel card is used for just charging electric vehicles or can also be used for purchasing other types of fuel:
- Electric Vehicle Charging
If an employer provides an electric fuel card specifically for charging an EV, the BIK rules state that there is no taxable benefit for the employee. This means that the value of the electricity provided for charging an EV is not subject to income tax or National Insurance contributions.
- Other Types of Fuel
If an employer provides a fuel card that can be used for purchasing petrol or diesel, the BIK rules apply as per the standard regulations. In such cases, the employee is liable to pay tax on the fuel benefit provided, which is calculated based on the appropriate fuel scale charge and the employee’s personal tax rate.
The final word on the Benefit in Kind rules for Electric Vehicles
Understanding the BIK rules for electric cars is essential for businesses and employees considering an electric company car.
The BIK rules offer dictate the tax implications and benefits associated with EVs. They are generally more favourable for EVs compared to traditional petrol or diesel vehicles, reflecting the government’s commitment to reducing carbon emissions.
Let’s recap on the key Benefit in kind (BIK) rules for Electric Vehicles:
- The Benefit in Kind rates (BIK) for Electric Vehicles are currently just 2% compared to the high-end gas-guzzling company cars that may incur up to 37% benefit-in-kind tax on a vehicle’s list price
- Hybrids incur a lower BIK rate than petrol/diesel only, this is determined by how far the car can travel in fully electric mode and how much CO2 it produces
- The government will continue to offer this tax incentive into 2027/28 and likely beyond, meaning that the lower rate in BIK will continue to encourage the adoption of electric vehicles within UK businesses
For EVs, the BIK rules offer significant advantages. Furthermore, certain benefits related to EVs, such as electric fuel cards used for charging EVs, are often exempt from taxable benefits. This means that employees can enjoy the convenience of workplace or employer-provided charging without incurring additional tax liabilities.
This lower tax liability for EVs makes them an appealing choice for both employers providing company cars and employees benefiting from them.
Electric Car Guide does not provide tax advice. This article is for informational purposes only and is accurate at the time of writing. Be aware that UK tax legislation may change and you should consult your accountant if you need advice specific to your personal circumstance.
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John is the Editor and Spokesperson for Electric Car Guide.
With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.
John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.