Officially known as Benefit in Kind Tax (BiK), the company car tax is calculated based on the P11D value of the vehicle, its CO2 exhaust emissions and the employee’s income tax band.
The transition to electric vans will benefit your employees. As from 2022 they will not pay any tax on a van available for personal use. Companies will also benefit as there will be no employer’s Class 1A National Insurance to pay either.
What is the BiK tax?
- HM Treasury sets the BiK tax rate and is usually collected through PAYE (pay-as-you-earn).
- Considerable savings can be made by choosing a low or zero-emissions plug-in vehicle over an equivalent fossil car.
- The reduced BiK rate will last until 2025, making pure battery and efficient plug-in hybrid electric vehicles an attractive choice.
The zero-emissions advantage for company car users
With companies accounting for nearly half of the new vehicles bought each year, and because 2% BiK makes a significant difference to an individual’s monthly wages, it is an attractive part of an employees package, and can significantly aid staff recruitment and retention.
Company Vans
As announced int he budget from 6 April 2021, the van benefit charge has been reduced to zero for vans that produce zero carbon emissions. This measure supports the government climate change agenda by encouraging the uptake up of vans that emit zero carbon emissions.
So, a move to electric vans will benefit your employees, who from 2021/22 will not pay any tax if the van is available for personal use. Companies will also benefit as there will be no employer’s Class 1A National Insurance to pay either.
