Company Car Tax Bands: Benefit in Kind (BIK) Rates 2020-2023
Company car tax bands, or Benefit in Kind (BIK) appears a complex world on the surface, but Pendle has put together an easy to read guide to make understanding BIK more straightforward.
First of all, let’s dive into what exactly company car tax bands are, and why you should take it into account when looking at company cars.
What are Company Car Tax Bands?
Not everyone is able to get their hands on a company car and it is seen as quite a privilege to be given one. Company cars are often implemented by businesses to either reward or retain staff, and are seen as an added luxury of sorts.
However, like all good things, they rarely come free. In the eyes of the government and HM Treasury, company cars are seen as additional taxable benefits that are not taken into consideration when looking at your standard National Insurance tax contribution.
HMRC considers a company car as an additional perk or ‘bonus’ on top of your annual salary. This is what is called ‘company car tax’ or ‘BIK’. The amount of tax that the government decides to take from you changes each year and is announced annually in the budget.
The amount that is taken is not a cut and paste approach, different cars are sorted into different company car tax bands and therefore pay different amounts. Cleaner cars with lower CO2 emissions pay less tax in order to encourage businesses to invest in greener cars.
The official .gov website states that you will pay tax if you or your family use a company car privately, including commuting.
How are Company Car Tax Bands/BIK Rates Calculated?
There are many specialist websites out there that will allow you to calculate the company car tax before going ahead with your contract hire lease. We would recommend taking a look at the HMRC car tax calculator - essentially information straight from the source.
Put simply, company car tax is calculated based on the list price of the car (excluding the first year's road tax, first registration fee) including options. This is referred to as the P11D value, and your personal tax rate depends on whether you pay 20%, 40% or 50%.
On top of this, the fuel type of the car is taken into consideration in the calculations for which company car tax bands you will slot into.
BIK on Diesel Cars
As if the world of diesel cars wasn't complicated enough, there is an additional surcharge in BIK rates for diesel cars. As of 6 April 2018, there is a 4% surcharge on any and all diesel makes and models that do not meet the 'real-world' driving section (RDE2 WLTP) of the WLTP regulations.
The ‘Real Driving Emissions Step 2 (RDE2) Test’ confirms that real-world emissions are close to, or better than, the Euro 6 emissions standards for NOx.
Although diesel plug-in hybrids are exempt simply because they are classified as alternative-fuel vehicles.
BIK on Electric Cars
Electric and hybrid leases have many notable benefits, especially when compared to their petrol and diesel counterparts. One of these notorious benefits is that company car tax bands are especially forgiving for electric and hybrid drivers.
Historically, fully electric vehicles (EVs) were tax exempt! But, of course, nothing is ever tax free. HMRC now charges Benefit in Kind (BIK) on electric cars and vehicles, but at a considerably lower rate than on diesel or even petrol cars.
This makes hybrid and electric vehicles the go to choice for businesses looking to lease company cars. And it makes perfect sense.
Company Car Tax Bands
Tax Bands for Company Cars Registered Before 6 April 2020
Below are the company car tax bands (BIK rates) for company cars registered before the 6th of April 2020. These include the CO2 emissions, the electric range and the company car tax (BIK rate) for the following years.
CO2 emissions g/km | Electric range | 2020-21 | 2021-22 | 2022-23 |
0 | N/A | 0 | 1 | 2 |
1-50 | >130 miles | 2 | 2 | 2 |
1-50 | 70-129 miles | 5 | 5 | 5 |
1-50 | 40-69 miles | 8 | 8 | 8 |
1-50 | 30-39 miles | 12 | 12 | 12 |
1-50 | <30 miles | 14 | 14 | 14 |
51-54 |
| 15 | 15 | 15 |
55-59 |
| 16 | 16 | 16 |
60-64 |
| 17 | 17 | 17 |
65-69 |
| 18 | 18 | 18 |
70-74 |
| 19 | 19 | 19 |
75-79 |
| 20 | 20 | 20 |
80-84 |
| 21 | 21 | 21 |
85-89 |
| 22 | 22 | 22 |
90-94 |
| 23 | 23 | 23 |
95-99 |
| 24 | 24 | 24 |
100-104 |
| 25 | 25 | 25 |
105-109 |
| 26 | 26 | 26 |
110-114 |
| 27 | 27 | 27 |
115-119 |
| 28 | 28 | 28 |
120-124 |
| 29 | 29 | 29 |
125-129 |
| 30 | 30 | 30 |
130-134 |
| 31 | 31 | 31 |
135-139 |
| 32 | 32 | 32 |
140-144 |
| 33 | 33 | 33 |
145-149 |
| 34 | 34 | 34 |
150-154 |
| 35 | 35 | 35 |
155-159 |
| 36 | 36 | 36 |
160 or more |
| 37 | 37 | 37 |
Tax Bands for Company Cars Registered After 6 April 2020
Below are the company car tax bands (BIK rates) for company cars registered after the 6th of April 2020. These include the CO2 emissions, the electric range and the company car tax (BIK rate) for the following years.
CO2 emissions g/km | Electric range | 2020-21 | 2021-22 | 2022-23 |
0 | N/A | 0 | 1 | 2 |
1-50 | >130 miles | 2 | 2 | 2 |
1-50 | 70-129 miles | 5 | 5 | 5 |
1-50 | 40-69 miles | 8 | 8 | 8 |
1-50 | 30-39 miles | 12 | 12 | 12 |
1-50 | <30 miles | 14 | 14 | 14 |
51-54 |
| 15 | 15 | 15 |
55-59 |
| 16 | 16 | 16 |
60-64 |
| 17 | 17 | 17 |
65-69 |
| 18 | 18 | 18 |
70-74 |
| 19 | 19 | 19 |
75-79 |
| 20 | 20 | 20 |
80-84 |
| 21 | 21 | 21 |
85-89 |
| 22 | 22 | 22 |
90-94 |
| 23 | 23 | 23 |
95-99 |
| 24 | 24 | 24 |
100-104 |
| 25 | 25 | 25 |
105-109 |
| 26 | 26 | 26 |
110-114 |
| 27 | 27 | 27 |
115-119 |
| 28 | 28 | 28 |
120-124 |
| 29 | 29 | 29 |
125-129 |
| 30 | 30 | 30 |
130-134 |
| 31 | 31 | 31 |
135-139 |
| 32 | 32 | 32 |
140-144 |
| 33 | 33 | 33 |
145-149 |
| 34 | 34 | 34 |
150-154 |
| 35 | 35 | 35 |
155-159 |
| 36 | 36 | 36 |
160 or more |
| 37 | 37 | 37 |
The Best Cars for Company Car Tax Bands
If you’re wondering which are objectively the best cars to drive based on their company car tax bands or BIK, then you’re in the right place. We’ve compiled a list of the ‘biggest winners’ in relation to company car tax bands to help you find the best car for your money.
Tesla Model 3
The first honourable mention is none other than the Tesla Model 3, one of the standouts in electric technology. Everything from the interior to the exterior is fashioned to perfection, the same is true for the technology present.
The Tesla Model 3 is able to accelerate 0-60mph in a matter of seconds, 3.1 to be exact. And if you’re wondering about the range, that too is extremely impressive with a WLTP range of 360 miles.
Not to mention, the Tesla Model 3 is one of the best cars currently on the market if you’re looking for a company car, because of BIK benefits alone. Due to its company car tax band, you’ll be fortunate enough to pay nothing in BIK for 2020/2021, not to mention the huge savings to fuel also.
Volkswagen ID.3
The Volkswagen ID.3 is another groundbreaking sight in the world of electric cars. Not only does the ID.3 have a driving range of up to 336 miles, but also has three impressive batteries to choose from.
If you’re looking for a car that is not only easy on your eyes, but easy on your wallet - the VW ID.3 might just be for you. Not only is the ID.3 one of the cheapest electric cars on the market, but you’ll pay nothing in BIK tax for 2020/2021.
BMW iX3 Premier Edition
The BMW iX3 is an all-electric SUV with a powerful silhouette, tremendous power and no shortage of driving range. Building on the already impressive X range, the BMW iX3 is an admirable rival for even the best electric cars.
The interior of the iX3 is reason enough alone to peak interest; with an elegant panoramic glass sunroof, IconicSounds Electric delivering various driving maneuvers with immediate feedback and an instrument cluster that has been specifically designed for electric driving - what more could you want?
And the cherry on the top, the BMW iX3 Premier Edition slots into a company car tax band that has you pay nothing in BIK tax throughout 2020/2021.
Notable Mentions
There are several other honourable mentions for cars that are exempt to company car tax due to their electric nature.
Some of the other notable company cars to choose from include the BMW 330e, the BMW 5 Series (hybrid), the Mercedes A 250 e Hatchback, the BMW 3 Series Saloon, and the Jaguar I-Pace SUV.
If you’re looking for a company car that has you paying very little or nothing in BIK tax, we’d heavily recommend looking into one of the above mentioned vehicles.
Company Car Tax Band Explained
There you have it, company car tax bands and Benefit in Kind (BIK) explained. Hopefully this makes finding the right business contract hire option much easier.
But if you’re still unsure whether to take a company car out on a business lease, or take allowance (if permitted) and take out a personal lease deal, then we’d recommend speaking to a financial advisor who can assist you.
And if you need help finding the right lease, our personal advisors are onhand to offer expert advice on any queries you may have - so get in touch today.
