Company car tax bands explained

Think BIK is a pen? Luckily, company car tax bands are explained here...

Dec 11, 2018

Similar to income tax bands, there are tax bands for company cars, and they affect how much money you have to pay HMRC for the use of a vehicle provided by your employer. There are just over 20 bands for cars, but these are only one part of the equation which calculates how much tax you will pay.

What’s more, the number of bands is set to increase as part of mini-overhaul to the UK company car tax legislation in 2020.

While hunting around for the perfect company car you will find terms such as ‘CO2 company car tax band’, ‘BIK rate’, ‘BIK band’ and ‘company car tax band’ all thrown around in rather blasé fashion, but don’t panic, they all mean the same thing.

What are company car tax bands used for?

What these bands do, is define what percentage of a car’s list price (when new) you pay tax on. The figure you get is then multiplied by your income tax band to find out how much company car tax you will pay in that year.

Each BIK (Benefit-in-Kind) band is defined by an upper and lower limit of CO2 emissions. For example, the second highest band is reserved for cars which emit between 175-179g/km of CO2, while the lowest is for those which emit between 0-50g/km of CO2. At least for the time being – more on this below.

An important side note is that all cars solely powered by diesel have an additional 4 per cent added to their bik rate, as part of the UK government's action to reduce emissions. 

UK company car tax band changes 2019 

For the 2019 tax year, all cars will receive a 3 per cent increase in the proportion of its value company car drivers have to pay tax on. This is capped at 37 per cent, so the highest BIK band moves from 180+g/km of CO2 to 165+g/km of CO2

UK company car tax band changes 2020

In 2020 the BIK bands are being changed again, but this time there are both increases and decreases in the percentage of the vehicle's list price you pay tax on. As the table below clarifies, zero emission cars, AKA all-electric cars, will drop from a BIK rate of 16 to 2 per cent. Quite a sizeable change when you consider electric cars such as the Jaguar I-Pace start north of £60,000.

While other types of electric cars – hybrids – will fall into five sub-bands based on their all-electric range. Again, the table below clarifies, but the key point here is the greater the all-electric range of your hybrid the less company car tax you will pay.

Company car BIK rates for 2018 and 2019

Below is a table which shows how the company car tax bands will change over the next year.

CO2 emissions (g/km)

2018 taxable value

2019 taxable value

0-50

13% (Diesel: 17%)

16% (Diesel: 20%)

51-75

16% (Diesel: 20%)

19% (Diesel: 23%)

76-94

19% (Diesel: 23%)

22% (Diesel: 26%)

95-99

20% (Diesel: 24%)

23% (Diesel: 27%)

100-104

21% (Diesel: 25%)

24% (Diesel: 28%)

105-109

22% (Diesel: 26%)

25% (Diesel: 29%)

110-114

23% (Diesel: 27%)

26% (Diesel: 30%)

115-119

24% (Diesel: 28%)

27% (Diesel: 31%)

120-124

25% (Diesel: 29%)

28% (Diesel: 32%)

125-129

26% (Diesel: 30%)

29% (Diesel: 33%)

130-134

27% (Diesel: 31%)

30% (Diesel: 34%)

135-139

28% (Diesel: 32%)

31% (Diesel: 35%)

140-144

29% (Diesel: 33%)

32% (Diesel: 36%)

145-149

30% (Diesel: 34%)

33% (Diesel: 37%)

150-154

31% (Diesel: 35%)

34% (Diesel: 37%)

155-159

32% (Diesel: 36%)

35% (Diesel: 37%)

160-164

33% (Diesel: 37%)

36% (Diesel: 37%)

165-169

34% (Diesel: 37%)

37% (Diesel: 37%)

170-174

35% (Diesel: 37%)

37% (Diesel: 37%)

175-179

36% (Diesel: 37%)

37% (Diesel: 37%)

180+

37% (Diesel: 37%)

37% (Diesel: 37%)

Company car BIK rates for 2020

Below is a table which shows how the company car tax bands will look after the 2020 changes come into force.

CO2 emissions (g/km)

2020 taxable value

0

2%

1-50

More than 130 miles of electric range

2%

70-129 miles of electric range

5%

40-69 miles of electric range

8%

30-39 miles of electric range

12%

Less than 30 miles of electric range

14%

51-54

15% (diesel 19%)

55-59

16% (diesel 20%)

60-64

17% (diesel 21%)

65-69

18% (diesel 22%)

70-74

19% (diesel 23%)

75-79

20% (diesel 24%)

80-84

21% (diesel 25%)

85-89

22% (diesel 26%)

90-94

23% (diesel 27%)

95-99

24% (diesel 28%)

100-104

25% (diesel 29%)

105-109

26% (diesel 30%)

110-114

27% (diesel 31%)

115-119

28% (diesel 32%)

120-124

29% (diesel 33%)

125-129

30% (diesel 34%)

130-134

31% (diesel 35%)

135-139

32% (diesel 36%)

140-144

33% (diesel 37%)

145-149

34% (diesel 37%)

150-154

35% (diesel 37%)

155-159

36% (diesel 37%)

160+

37% (diesel 37%)

How to find company car BIK rates

The easiest place to get information on company cars’ BIK rates is online, failing that, your local dealer. Sadly, most car manufacturer websites are different from one another, but most do have dedicated business user sections which make it easy to find information such as bik rates.

If you are struggling to find the right page when using Google, strap on ‘BIK rates’ or ‘P11D value’ to the end of your search to help find the page you need. It is often easier to find the CO2 emissions of a car on a manufacturers website and then compare it to the tables we have provided above to work out BIK rates.

Company car tax calculation example

Company car tax is worked out using the following steps:

  • Find the list price or P11D value of a car when new
  • Find the car’s BIK band based on its CO2 emissions
  • Check whether it is a diesel
  • Multiply its BIK band (plus diesel penalty if applicable) by its list price
  • Then, multiply the above value by your income tax band

As an example, if a petrol company car costs £10,000, emits 107g/km of CO2 (meaning a bik rate of 22 per cent) and is provided to an employee who pays 20 per cent income tax, then the amount of company car tax they would pay is £440.

Calculated by multiplying list price by BIK band: £10,000 x 0.22 = £2,200. The next stage is to multiply by the income tax rate: £2,200 x 0.2 = £440.

As a final note, the definition of a company car is often confused, so for the sake of clarity, a company car is a vehicle which an employer provides an employee (either directly or via an allowance) that is used by said employee for private use.

       

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