BIK rates and company car tax

company car BIK rates 2017

Page reflects changes to car tax as announced in Budget 2016

Company car tax is designed to encourage employers and company car drivers to choose cars with lower levels of CO2 emissions; incentives are offered both to the company and to the recipient of the vehicle to select low emission vehicles.

Under the current system, company and employee company car tax are both based on a percentage of the official price of the car (called the 'P11D'), the percentage being primarily determined by the car's CO2 emissions. For the employee, the Benefit-in-Kind (BIK) is then taxed at the appropriate personal tax rate (usually collected through PAYE).

Being primarily CO2-based, the system of company car tax has contributed to a significant increase in the number of diesel cars in the UK – around half of UK new cars are now diesels as compared to only around 20% a decade ago. Company tax benefits for zero-emission vehicles has also led to the majority of electric car sales being for fleet or company car use.

The company car tax payable by an employee is based on the vehicle's P11D value multiplied by the appropriate BIK rate (determined by the car's CO2 and fuel type) and the employee's income tax rate (basic rate of 20%, higher rate of 40% or additional rate of 45%).

Company car BIK rates 2017 - 2021

The rates shown are for April 2015 to March 2020 as confirmed in Budget 2015.

Company car BIK rates in 2016 start at 15% for conventional petrol and 18% for diesel vehicles, the rate increasing in 1% increments with increasing CO2 up to a maximum of 37%.

The rates for diesel vehicles are generally 3% higher than those for petrol equivalents, this is to take into account the greater emissions of local pollutants such as NOx.

All hybrid company cars also receive a reduced BIK rate as a result of their lower CO2 emissions, which tends to reduce their BIK rates by at least 5%. Note that for diesel hybrid powered cars, the 3% diesel surcharge does not apply.

Ultra Low Carbon Vehicles (ULEVs) are rewarded with lower BIK rates – from April 2016, plug-in hybrids are rated at 7% or 11% (depending on official CO2 emissions), and battery electric cars are rated at 7%.

In April 2016 and 2017, BIK rates for cars in the 0-50 g/km and 51-75 g/km CO2 bands are due to increase by 2% per year with a 3%-4% rise planned for 2018. However, a 4% differential between the three lowest CO2 bands will be maintained in 2017, reducing to a 3% differential in 2018 and 2% thereafter in line with the previous Budget announcements.

The tables below show how the percentage BIK rates vary with vehicle CO2. The table represents both petrol, diesel and electric related BIK rates for this and the next four tax years.

For vehicles registered before 1st January 1998, there is no reliable source of CO2 emissions data. If such vehicles are used as company cars, they are taxed according to engine size: Up to 1,400cc, BIK 15%; 1,401-2,000cc, BIK 22%; Over 2,000cc, BIK 32%.

Company Car Tax BIK Rates 2015-20: HMRC Fuel Type E (zero-emission cars)

Vehicle CO2  
g/km
2015-16
%BIK Rate         
2016-17
%BIK Rate         
2017-18
%BIK Rate         
2018-19
%BIK Rate         
2019-20
%BIK Rate         
Electric Electric Electric Electric Electric
0 (EV) 5 7 9 13 16

Source: Budget 2014, Budget 2015. Notes: For cars registered since 1998.

Company Car Tax BIK Rates 2015-20: HMRC Fuel Type D (diesel cars) and A (other cars)

Vehicle CO2  
g/km
2015-16
%BIK Rate         
2016-17
%BIK Rate         
2017-18
%BIK Rate         
2018-19
%BIK Rate         
2019-20
%BIK Rate         
Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel Petrol Diesel
1-50 5 7 9 13 16
51-75 9 11 13 16 19
76-94 13 16 15 18 17 20 19 22 22 25
95-99 14 17 16 19 18 21 20 23 23 26
100-104 15 18 17 20 19 22 21 24 24 27
105-109 16 19 18 21 20 23 22 25 25 28
110-114 17 20 19 22 21 24 23 26 26 29
115-119 18 21 20 23 22 25 24 27 27 30
120-124 19 22 21 24 23 26 25 28 28 31
125-129 20 23 22 25 24 27 26 29 29 32
130-134 21 24 23 26 25 28 27 30 30 33
135-139 22 25 24 27 26 29 28 31 31 34
140-144 23 26 25 28 27 30 29 32 32 35
145-149 24 27 26 29 28 31 30 33 33 36
150-154 25 28 27 30 29 32 31 34 34 37
155-159 26 29 28 31 30 33 32 35 35 37
160-164 27 30 29 32 31 34 33 36 36 37
165-169 28 31 30 33 32 35 34 37 37 37
170-174 29 32 31 34 33 36 35 37 37 37
175-179 30 33 32 35 34 37 36 37 37 37
180-184 31 34 33 36 35 37 37 37 37 37
185-189 32 35 34 37 36 37 37 37 37 37
190-194 33 36 35 37 37 37 37 37 37 37
195-199 34 37 36 37 37 37 37 37 37 37
200-204 35 37 37 37 37 37 37 37 37 37
205-209 36 37 37 37 37 37 37 37 37 37
210-214 37 37 37 37 37 37 37 37 37 37
215-219 37 37 37 37 37 37 37 37 37 37
220-224 37 37 37 37 37 37 37 37 37 37
225-229 37 37 37 37 37 37 37 37 37 37
230 or above 37 37 37 37 37 37 37 37 37 37

Source: Budget 2014, Budget 2015, Spending Review 2015. Notes: For cars registered since 1998. For diesel hybrid powered cars, the 3% diesel surcharge in 2014-15 and 2015-2016 does not apply. For HMRC purposes, Fuel Type E is for zero-emission cars (including those which run on electricity only), Fuel Type D is for all diesel cars (former types D and L), and Fuel Type A is for all other cars (former types P, H, B, C, G).

3% diesel supplement 2017 - 2021

Since the Spending Review 2015, Next Green Car has been attempting to clarify with HMRC details of the newly announced continuation of the three per cent diesel surcharge beyond 2016. In particular we have been looking to confirm whether diesel-hybrids will continue to be exempt from the 3% diesel supplement, as they are now.

While, at the time of writing, we have as yet been unsuccessful in obtaining confirmation, we believe that the most likely scenario is that diesel-hybrids will continue to be exempt from the 3% diesel supplement beyond 2016 and continue to be taxed as petrol cars under company car taxation. However, we will confirm this (or otherwise) as soon as further information is available.

Ben Lane

Author:Ben Lane
Date Updated:10th Mar 2015

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