From 6th April 2020, Benefit in Kind (BIK) savings on efficient plug-in hybrid electric vehicles and battery electric vehicles will increase dramatically, in measures are designed to increase the uptake of fully electric cars among fleets.

What is a BIK (Benefit in Kind)?

Benefits in Kind are the benefits that employees or company directors receive from the company they work for, which aren’t included in their salary or wages. Examples include company cars and healthcare benefits.

Some BIKs are taxed and some are not; there are complex rules around each type of benefit and circumstantial considerations that HMRC take into account before deciding whether a BIK is taxable.

In this article, we’re going to be discussing  HM Treasury’s decision to heavily incentivise the uptake of Battery Electric Vehicles (BEVs).

At a Glance

The company car taxation system will be undergoing a revamp in 2020, with electric vehicles set to be exempt from BIK tax from April 2020. BIK rates will increase to 1% from April 2021 and to 2% in April 2022.

What is a P11D Form?

A P11D form is a document employers use to tell HMRC about the benefits their employees are receiving.

For company cars, the P11D value is a calculation based on:

  • The vehicle’s list price.
  • Any optional extras fitted.
  • Delivery fees.
  • VAT.

When combined with the CO2 emissions figure, and the employee’s income tax band, you get the Benefit in Kind rate.

BIK Rates for Electric Cars

The table below shows the BIK rates for electric cars registered after April 2020:

Vehicle CO2 emissions

BIK Rate

  2020-21 2021-22 2022-23
0 g/km

0%

1%

2%

1-50 g/km (electric range >130 miles)

0%

1%

2%

1-50 g/km (electric range 70-129 miles)

3%

4%

5%

1-50 g/km (electric range 40-69 miles)

6%

7%

8%

1-50 g/km (electric range 30-39 miles)

10%

11%

12%

1-50 g/km (electric range <30 miles)

12%

13%

14%

Impact on the New Car Market

While it’s thought that this shift in BIK will have a short-term negative effect on the new car market, as customers wait for the new tax break, it’s hoped that the new regulations will give a substantial benefit to the industry next year, and for the years that follow. 

The new tax cut is a welcome incentive to help the push toward zero emissions motoring, even more so after the government reduced the payments available through the grant scheme for new purchases of BEVs, and it demonstrates their commitment, and recognition of the value of the fleet or company car market to support the Road to Zero campaigns.

Who Will Benefit from the Changes?

While it looked like the internal combustion vehicles were set to suffer further, under the introduction of the WLTP regulations, they too will see minor benefits under the new taxation scheme, but the real benefits come to those choosing cleaner technology, be that a Battery Electric Vehicle, or a Plug-in Hybrid Electric Vehicle.

The headline is ‘0% BIK rate on new vehicles’, but the reality is that even vehicles registered before 6th April 2020 will find huge benefit under the new scheme, and that’s great news for company car drivers and fleet owners.