The provision of a company car that is available for the employee’s private use is treated as a benefit in kind (BIK). The benefit is valued as an ‘appropriate percentage’ of the car’s total list price and is dependent upon the car’s CO2 emissions. The emissions figure can be found on the car’s registration document (V5C).
Above 75g/km CO2, the appropriate percentage continues to increase by 1 percentage point for each increase of 5g/km CO2, to a maximum of 37%.
Changes from the 2020/21 tax year are designed to further incentivise the operation of electric vehicles as company cars. A total of 11 new bands for ultra-low emission vehicles below 75g/km will be introduced – five are linked to the number of miles a car can travel on electric power alone – including a separate zero emission band. Vehicles emitting 51-54g/km will be taxed at 15%, after which a one percentage point increase applies per 5g/km CO2.
So, in 2019/2020 all electric vehicles with 50g/CO2 emissions or less, pay 16% BIK. In 2020/2021 the rates change to be banded based on electric range, with EVs that can drive 130 miles or more on electric power dropping to a 2% BIK rate. A plug-in hybrid with 1-50g/km CO2 emission and an electric range of less than 30 miles will drop from 16% to 14%, or to 12% if the zero emission range is 30-39 miles. A BIK tax calculator is available at www.hmrc.gov.uk/calcs/cars