Employee / Employer / Salary Sacrifice

Understanding BIK in 2023

Tax can indeed be taxing – so we have put together a handy guide aimed at taking the mystery out of how the Government work out the taxable benefit of your new car.

Choosing a new car with Tusker is exciting. With so many cars and range options to choose from, picking your next car couldn’t be easier and even better, with the benefit of Tusker’s Salary Sacrifice scheme, getting into your next new car couldn’t be more cost effective.

Learn more about Salary Sacrifice

Thanks to Tusker and to the government’s tax bands and our Salary Sacrifice scheme, you can save big money on your tax as well, particularly if you opt for a 100% electric vehicle.

But we know that Benefit in Kind tax can be confusing, so we have also put together this handy guide to explain what it all means.

  1. What is Benefit in Kind (BIK)?

BIK is a tax which must be paid on benefits you receive from your company, in addition to your salary. This can be anything from childcare vouchers to health insurance, or company cars. This means that if you have a company car which you use on your own time or for personal mileage you must pay Benefit in Kind tax.

  1. Why is it important when choosing a car?

As a first step in working out which new car is right for you, understanding your budget is key. It’s a step that can sometimes be left until last, especially as working out how much tax you will pay can be daunting.

Making sure that your monthly Salary Sacrifice budget includes any tax for your vehicle, means that you can have peace of mind with the total cost picture of your new car, leaving you free to enjoy the experience of a new car.

With Tusker, we take care of all vehicle costs like insurance, servicing, repairs and even breakdown cover as part of our monthly fee.

  1. Basic Jargon busted: What is P11D?

​P11D is a document used by an employer to list any expenses or benefits given to their employees. It is submitted to HMRC yearly and includes services such as private healthcare, company cars or season ticket loans.

For company cars, P11D is the total taxable value of your new car, including all the optional extras or add-ons you have chosen.

  1. How is BIK calculated?

For low emission cars (those with less than 75g/Km CO2), there are three main steps to calculating your BIK:

  1. Take the P11D value of your car
  2. Multiply the P11D value by the percentage band that your car will belong to, as shown here. Basically, the higher the CO2 emissions generated by your car the higher the tax, the lower the emissions so your tax reduces.
  3. Finally, multiply this number by your income tax band – either 20%, 40% or 45%

Divide this by 12 to get your monthly BIK amount payable on your car. If you’re paid on a 4-weekly basis, divide by 13 to reflect the number of pay periods.

For cars with more than 75g/Km CO2, the taxable benefit is calculated based on the higher value of either the gross salary sacrifice amount or the Benefit in Kind value explained above.

  1. Does it matter if I have a petrol, diesel or an EV?

It’s important to remember that the Government changed taxes in 2018 to encourage you into a more eco-friendly car, which has meant an extra charge of 4% has been added to any diesel cars which don’t conform to the Government’s Real Driving Emissions Stage 2 standards.

Tusker continues to offer drivers the choice of all electric, hybrid, petrol, and diesel cars as it knows that different fuel types fit in with different driver needs and annual mileages covered.

  1. What does this mean in simple terms?

In short, the more expensive and polluting your car, the more you will pay. In-line with the UK Government’s targeted emissions reduction strategy, the BIK banding favours ultra-low emissions, or electric vehicles and becomes progressively less cost effective for vehicles with higher emissions. So, the eco-friendlier your choice, the cheaper it will be.

Fortunately, Tusker has a huge range of low emission and ultra-low emission vehicles to choose from, so you can pick a car which will be perfect for you, and which won’t cost the earth.

The great news is that thanks to the Government’s push to get us driving electric vehicles, BIK remains at a really low rate. BIK is fixed at 2% until 2025, and only rises by 1% per year until 2028, making zero emission cars more affordable.

  1. What are the BIK rates for electric cars?

The BiK rates for an electric car or ULEV (ultra low emission vehicle) are fixed at 2% until April 2025 . After 2025, the rates will increase by 1% each year until 2028.

  1. What does this mean in the real-world?

Basically, you can make big savings on running a brand new EV compared to the petrol equivalent. Using the handy example below, put together by EDF, the difference is clear.

2022/23 2023/24 2024/25
Mini Electric (per year) £148 £148 £148
Mini Hatch (per year) £1382 £1382 £1382

Another very useful tool is this very easy to follow comparison guide by Next Green Car, which allows you to see the BIK values of the electric cars currently on the market.

  1. Tax benefits of going electric

Don’t forget, on top of low BIK, you can also enjoy a host of other benefits with an electric car. Running costs are lower than petrol or diesel vehicles, but there are other benefits too such as exemption from congestion charging taxes and in a lot of UK cities, lower parking costs. With Tusker, driving a new EV car is a win-win situation.

  1. Final Thought – Let Tusker do the hard work

If you are still not sure about exactly how much the BIK will cost on the car you want, fear not – Tusker has a free BIK calculator available for customers on their website. Tusker’s calculator will work out all the figures for you, for maximum ease. Login now to use the calculator:

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