Company Car (BIK) Tax Calculator

BIK stands for "Benefit in Kind." BIK tax is the tax that you have to pay on additional benefits you receive from your employer, which is in addition to your regular salary.

Some examples of BIK benefits include:

• Company car
• Private health insurance
• Gym membership

The purpose of BIK tax is to ensure you pay tax on your full compensation package, including any non-cash benefits provided by your employer, not just your regular salary.

When your employer provides additional benefits to you (on top of your regular salary), the value of those benefits is added to your taxable income. This means that you have to pay income tax on the value of those benefits, just like you would on your regular salary.

The amount of BIK tax you have to pay depends on the value of the benefit and your personal tax rate. Your employer is responsible for reporting the BIK benefits to His Majesty’s Revenue & Customs (HMRC) and calculating the correct amount of tax that you owe.

The key steps to working out your BIK tax are:

1. Determine the value of the benefit: This is the published or market value of the item or benefit provided.
2. Calculate the BIK percentage: The BIK percentage is set by the tax authorities and depends on the type of benefit. 
   You can find the BIK percentage for different types of benefits on the government's BIK tax rates table.
3. Calculate the BIK value: BIK Value = Benefit’s Value × BIK Percentage
4. Apply your personal income tax rate to get the BIK tax amount: BIK Tax = BIK Value × Your Income Tax Rate
   Your income tax rate will be either 20% (basic rate), 40% (higher rate), or 45% (additional rate), depending on your total taxable income.

For example, if the benefit’s value is £5,000 and the BIK percentage is 20%, the BIK value would be:

BIK Value = £5,000 × 0.20 = £1,000

If your income tax rate is 40%, the BIK tax would be:

BIK Tax = £1,000 × 0.40 = £400 

Yes, your BIK tax is usually spread out over your regular monthly pay checks. 

While the BIK benefit value is calculated annually, the actual BIK tax is paid in smaller amounts through regular monthly payroll deductions rather than as a single lump sum payment. 

This approach helps spread out the tax burden for you throughout the year, rather than requiring a large one-time BIK tax payment.

However, if your employer is not payrolling your benefits, then you will need to report your benefits to HMRC either through the P46/P11D reporting process or by self-reporting via HMRC.gov forms. This ensures that HMRC is aware of your benefits and can update your tax code accordingly. 

Please note that from April 2026, all employers will be required to payroll employee benefits, so the monthly deduction approach will be mandatory going forward.

When your employer provides you with a company car, you have to pay tax on that as a "Benefit-in-Kind" (BIK). The amount of tax you pay is based on a few key factors about the car:

• The List Price: This is the original price the car was sold for brand new, including any extras.
• The Car's Emissions: How much carbon dioxide (CO2) the car emits per kilometre driven. The higher the emissions, the more tax you'll pay.
• Fuel Type: Whether the car runs on petrol, diesel, hybrid, or is fully electric. Electric cars have the lowest tax rates.

The government sets a percentage rate that gets applied to the car's list price to determine your annual company car tax amount.

For example, let's say the list price of your company car is £30,000 and it emits 100 grams of CO2 per kilometre (a moderate emissions level for a petrol/diesel car). The percentage rate the government has set for a car like that is 27%.

To calculate your annual company car tax:

£30,000 (list price) x 0.27 (27% tax rate) = £8,100.

£8,100 x 0.2 (20% income tax) = £1,620

Alternatively, if you were to choose an electric vehicle (EV) with a list price of £35,000, the percentage rate would only be 2%.

The annual company car tax for the EV would be:

£35,000 (list price) x 0.02 (2% tax rate) = £700

£700 x 0.2 (20% income tax) = £140

As you can see, the EV option results in a significantly lower company car tax compared to a petrol or diesel vehicle.

So, in this case, you'd either have to pay £1,620 (for a petrol or diesel car) or £140 (for an EV) per year in company car tax. If your employer is payrolling your benefits, then they will take a little bit out of your monthly pay checks to cover this BIK amount.

However, if your employer is not payrolling your benefits, then you will need to report the car benefit to HMRC either through the P46/P11D reporting process or by self-reporting via HMRC.gov forms. This ensures that HMRC is aware of the car change and can update your tax code accordingly.

Please note that from April 2026, all employers will be required to payroll employee benefits, so the monthly deduction approach will be mandatory going forward.

The key thing to remember is that the more emissions your company car produces, the higher the tax you'll have to pay.