Which Company Car Gives You the Most Out of the Benefit In Kind

A company car is a desirable perk when looking for a new job. But if you don’t choose the right car, you could be stung with a pretty hefty tax bill.

The government has incentivised making a switch to electric vehicles to help reach the target of being net-zero by 2050. This is great news as you can do your part to help reduce climate change whilst saving yourself a small fortune - there hasn’t been a better time to get yourself a company car.

What Is Benefit In Kind Tax?

Every company car in the UK is subject to a Benefit in Kind (BIK) tax, sometimes referred to as the company car tax, when used for any personal use - this even includes the daily commute to and from your workplace.

The BIK can also be applied to other perks and benefits such as accommodation, however, we will only be discussing the tax in terms of a company car. Using a company car for personal use qualifies it as a perk meaning it’s subject to the tax.

The tax value is worked out using a basic formula taking into account the below:

● Your earnings - tax bracket

● ‘P11D’ value - list price of the car and any additions

● The CO2 produced by the car and the fuel type

The Renault TWIZY Has The Lowest BIK

Choosing an EV will save you money on your company car but which is going to save you the most. Check out the cheapest options available below:

Top Ten Electric Company Cars With The Lowest BIK Tax

Rank

Car

List Price

20% Tax

40% Tax

1.

Renault TWIZY

£11,995

£23.99

£47.98

2.

Smart Fortwo

£20,785

£41.57

£83.14

3.

SEAT Mii electric

£22,800

£45.60

£91.20

4.

VW e-up!

£23,555

£41.11

£94.22

5.

Smart Forfour

£23,920

£47.84

£95.68

6.

Kia e-Niro

£24,105

£48.21

£96.42

7.

Mazda MX-30

£26,045

£52.09

£104.18

8.

MINI Electric

£27,320

£54.64

£109.28

9.

MG5

£27,595

£55.19

£110.38

10.

Hyundai KONA

£27,950

£55.90

£111.80

Prices based on the cheapest list price at 20% and 40% personal tax rate.

The cheapest vehicle for the BIK tax is the Renault TWIZY with its low payments of just £23.99 for those on a 20% rate. This is by far the cheapest EV on the market at the moment due to its small size but high functionality.

Smart, a subsidiary of Mercedes-Benz, has two vehicles in the top ten cheapest BIK rates. The Fortwo is in second and Forfour in fourth - both are very affordable vehicles and ideal for city cars with short commutes.

The SEAT Mii electric closes out the top three with its estimated range of up to 160 miles and rate of just £45.60 if you’re on a 20% tax rate.

The EVs in the top ten offer huge monthly savings when compared to their petrol and diesel equivalents and help to reduce greenhouse gases in the air.

Choosing An EV Could Save You Thousands Of Pounds Per Year

As we mentioned above, there are three factors that affect the cost of your BIK. Here, we’ll look at them in a little more detail.

First off, you have to work out the ‘P11D’ value of the car. This is the list price, VAT, delivery and any optional extras you choose.

From there, the CO2 rate is taken into account. You can find the full list below but basically, the more CO2 your car emits, the more expensive it’ll be. So if you choose an electric vehicle, the tax rate for 2021/22 is just 1%.

Then your income tax rate is used - you’ll usually be taxed 20%, 40% or 45% in the UK depending on how much you earn. Whatever the tax rate of the vehicle, you pay your taxable rate on this.

If you have a diesel car, you’ll have to pay an extra fee for the Nitrogen Oxides (NOx) emissions.

Below you’ll find two simple examples:

EV BIK Example - if you choose an electric car with a ‘P11D’ value of £10,000 with a 1% tax for its emission rate and you’re taxed 20%, the total would be just £20.

Petrol BIK Example - for a car of the same £10,000 value in petrol with a CO2 emissions rate of 130-134 g/km the rate is 30%. Based on the same tax rate of 20%, you’ll end up paying £600.

If you use the car part-time or make a contribution to the cost, you may be able to reduce the BIK cost.

Electric Vs. Petrol

We’ve looked at cars of a similar spec for both EVs and petrol cars to see just how much cheaper they are in the real world. Check out what we found out below:

Car

Vauxhall Corsa-E

Vauxhall Corsa

Fuel type

Electric

Petrol

CO2 g/km

0

118

Cost

£29,640

£15,615

BIK at 20%

£59.28

£843.21

When looking at the BIK for a Vauxhall Corsa, even though the cost of a petrol car is greater, the BIK is significantly lower. You’ll save £783.93 making the switch to electric.

Car

Tesla Model 3

BMW 3 Series Saloon

Fuel type

Electric

Petrol

CO2 g/km

0

155

Cost

£40,990

£41,590

BIK at 20%

£81.98

£2,911.30

Comparing the Tesla Model 3 with a BMW 3 Series, two similar style cars at a similar price, give a massive saving of £2,829.32 on the BIK tax.

Cars Registered From April 2021

Below, you’ll find the current rates until 2025:

BIK rates until 2025

CO2 (g/km)

Electric Range (miles)

2021-22 (%)

2022-23 (%)

2023/24 (%)

2024/25 (%)

0

N/A

1

2

2

2

1-50

>130

1

2

2

2

1-50

70-129

4

5

5

5

1-50

40-69

7

8

8

8

1-50

30-39

11

12

12

12

1-50

<30

13

14

14

14

51-54

14

15

15

15

55-59

15

16

16

16

60-64

16

17

17

17

65-69

17

18

18

18

70-74

18

19

19

19

75-79

19

20

20

20

80-84

20

21

21

21

85-89

21

22

22

22

90-94

22

23

23

23

95-99

23

24

24

24

100-104

24

25

25

25

105-109

25

26

26

26

110-114

26

27

27

27

115-119

27

28

27

27

120-124

28

29

29

29

125-129

29

30

30

30

130-134

30

31

31

31

135-139

31

32

32

32

140-144

32

33

33

33

145-149

33

34

34

34

150-154

34

35

35

35

155-159

35

36

36

36

160-164

36

37

37

37

165-169

37

37

37

37

170+

37

37

37

37

Want to know the BIK rate of a specific model? Use the Vanarama BIK tax calculator.

Methodology

We used the cheapest available list price for each vehicle with a basic tax rate of 20% and 40% to work out the costs. Prices will vary according to where the car is from and the tax rate of the individual. We looked at 40 EVs available in the UK for under £50,000 to find the Renault TWIZY has the lowest BIK tax.

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