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Benefit-in-Kind (BiK) Guide

How company car Benefit-in-Kind works, what drives the tax you pay, and how the HMRC percentages are applied.

What is Benefit‑in‑Kind (BiK)?

Benefit-in-Kind (BiK) is a tax on non-cash benefits that an employee receives from their employer. It covers a wide range of perks (for example, private medical insurance or gym memberships), but the company car is usually the most valuable BiK for many employees and directors.

If your employer provides a car that you can use privately (any non-business travel, including commuting), HMRC treats that access as a taxable benefit. You pay income tax on the assessed BiK value via PAYE, and your employer pays Class 1A National Insurance on the same figure.

How the BiK Charge Is Calculated

The Formula

BiK Value = P11D Value × BiK %
Income Tax Due = BiK Value × Your marginal tax rate

The Three Key Components

1. P11D Value

The car’s list (P11D) price when new, including VAT and factory‑fitted options and accessories. It normally stays fixed for the life of the benefit (ignoring certain capital contributions).

2. BiK Percentage

Set each tax year mainly by CO₂ emissions and fuel type. Lower emissions = lower % (subject to minimums). A diesel supplement can apply to some non-RDE2 diesel cars (capped at 37%). Rates are published annually by HMRC.

3. Your Tax Rate

Your marginal income tax band (20%, 40%, 45%). The BiK amount is simply treated as extra taxable income within PAYE.

Worked Example

Car:BMW 3 Series (petrol)
P11D Value:£40,000
CO₂ Emissions:130 g/km
BiK Percentage (2026-27):32%
Annual BiK Value:£40,000 × 32% = £12,800
Income Tax Payable:
Basic rate taxpayer (20%):£2,560/year (~£213/month)
Higher rate taxpayer (40%):£5,120/year (~£427/month)
Additional rate taxpayer (45%):£5,760/year (~£480/month)

* Collected through PAYE via an adjusted tax code. Employer also pays 15% Class 1A NI from 6 April 2025 (≈£1,680/year on this BiK value).

BiK Percentage Bands (2025–26 and 2026–27)

BiK percentages depend chiefly on CO₂ emissions, fuel type and (for plug‑in hybrids) electric-only range. Policy intentionally favours lower‑emission vehicles.

Vehicle TypeCO₂ EmissionsBiK %Example
Pure Electric (BEV)0 g/km3% (2025-26); 4% (2026-27)*Tesla Model 3, Nissan Leaf
Plug-in Hybrid1-50 g/km4–16%*BMW 330e, VW Passat GTE
Efficient Petrol/Diesel51-90 g/km17-23%Toyota Prius, Ford Fiesta
Standard Petrol/Diesel91-140 g/km24-33%VW Golf, Ford Focus
Higher Emissions141-170 g/km34-37%BMW 5 Series, Audi A6
High-Performance/SUV171+ g/km37%+Range Rover, Porsche Cayenne

* Zero-emission company car BiK: 3% (2025-26), 4% (2026-27), 5% (2027-28), 7% (2028-29), 9% (2029-30). Plug-in hybrid rates for 2026-27 vary with electric range: 130+ miles = 4%; 70–129 miles = 7%; 40–69 miles = 10%; 30–39 miles = 14%; under 30 miles = 16%. Petrol/diesel bands in the table are 2026-27 WLTP appropriate percentages.

What Counts (and What Doesn’t)

Included in BiK Calculation

  • ✓Private use of the company car
  • ✓Commuting to work
  • ✓Other personal mileage (holidays, errands, etc.)
  • ✓Car’s list price including VAT
  • ✓Factory-fitted options and accessories

Not Included in BiK

  • ℹBusiness mileage (not taxed)
  • ℹCompany‑funded fuel used solely for business travel
  • ℹInsurance (paid by employer)
  • ℹServicing and maintenance
  • ℹRoad tax (paid by employer)

How BiK percentages compare

Zero-emission cars

Fully electric vehicles have a 4% BiK rate in 2026-27 (3% in 2025-26), versus 25–37% for many petrol and diesel cars. On a £40,000 car a higher-rate taxpayer pays £640 income tax on a 4% benefit, versus £5,120 on a 32% benefit. Illustrative only.

Plug-in hybrids

PHEVs with 1–50 g/km CO₂ use electric range for the 2026-27 percentage: 4% at 130+ miles, up to 16% under 30 miles. Charging regularly is what the WLTP range figure assumes; real-world electric miles can be lower.

Fuel benefit is separate

If the employer also pays for private fuel, a fuel benefit charge can apply on top of the car BiK. Reimbursing private fuel, or not providing it, is how that charge is avoided — whether that is worthwhile depends on private mileage.

Optional extras sit on the P11D

Factory-fitted options increase the list price used for BiK. Each extra £1,000 of P11D adds the BiK percentage of that amount to the taxable benefit.

Cash allowance compared with a company car

Some employers offer a cash alternative instead of a company car. The modelled tax on each route can differ widely with CO₂, list price and tax band. The calculator shows the company-car side; it does not recommend one route.

Using Car Cost Comparison

Car Cost Comparison can show modelled Benefit in Kind for a company car, or personal purchase and lease costs, using the same P11D list price and emissions:

  • Model BiK from P11D value, CO₂ and fuel type
  • See the employee income-tax figure and employer Class 1A NI
  • Compare buy outright, hire purchase, PCP and lease on the personal side
  • Use 2026/27 appropriate percentages for electric and plug-in hybrid cars

Figures are illustrative. They are not a recommendation of which car to choose or how to buy it.

Open Car Cost Comparison

Further Resources