From April 6th 2022, for cars first registered from 6 April 2020, an electric car will be taxed on 2% of the list price of the vehicle, compared to the 32% for a petrol, and 33% for a diesel. With this in mind, the easiest way to keep your benefit-in-kind (BIK) tax bill low is by choosing an electric vehicle as these rates will be frozen until 2025.
Plug-in Hybrid vehicles (PHEVs) also have low tax rates. A PHEV that does around 25 miles on pure battery power will have a BIK rate of 14%.
However, there some other things to consider which could help reduce costs.
Drivers need to watch out which optional extras they choose for their company cars. For example, larger wheels will increase the CO2 emissions and reduce the range, which could put the vehicle in a higher tax band.
There are some manufacturers that offer specific trim levels designed to keep the list price low in order to reduce the BIK payments compared to the equivalent aimed at the retail market.
Vans and pick-ups are slightly different when it comes to BIK, because they have a fixed taxable value of £3600 instead of a sliding scale based on a CO2-weighted percentage of their list price, making them more tax-efficient than some large cars. Most drivers won’t get a van unless they need one, but the BIK on vans and pick-ups has created a market for double-cab pick-ups. These are still classed as a commercial vehicle as long as they provide a one-tonne payload. You’ll also benefit from high spec trim levels and massive towing ability, as well as two rows of seats like a conventional car.
Company car tax calculator
The lovely people at Autocar have created a company car tax calculator that let’s you calculate the costs of your company car. You can find the company car calculator here.