Benefit in Kind company car tax guide for 2020

Understanding Benefit in Kind (BIK) Company Car Tax with our Ultimate 2020 Guide

What does BIK mean for you and how much company car tax will you have to pay?

HMRC have finally provided draft legislation regarding Benefit in Kind Tax for company cars which covers April 2021 through to April 2023 which at least provides certainty for the next 3 and a half years for company car drivers.

However, there is yet another level of complexity being added for Benefit in Kind tax from next tax year. Cars registered prior to April 2020 will be taxed at a different rate than cars registered after this date.


The rationale is due to the next increase in CO2 emissions kicking in at this point when full WLTP (Worldwide harmonised Light vehicle Test Procedure) measurement becomes effective.

Benefit in Kind Calculator

Download our ultimate Benefit in Kind guide to help with your fleet cost management, which includes a detailed breakdown of the BIK rates for all vehicles based on their emissions to help you calculate what the new rules mean for you and how much company car tax you’re going to pay.

Download our ultimate Benefit in Kind Company Car Tax Guide

Our guide provides a thorough overview of the current state of affairs relating to Benefit in Kind for company car drivers, exploring the tax implications to help you understand what you'll be paying.

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Will this cost your business more money?

This example demonstrates that further costs will be incurred by the employer, as not only will the employer’s National Insurance liability increase as the benefit increases, they will also be liable to lease rental restriction as the car in question will be over 110g/km under WLTP measurement.

With increasing complexity and the rising cost in running your vehicle fleet, ERA’s Fleet Management team could help you cut through the red tape, reduce your costs and take away a constant and persistent headache for your business.

Image for illustrative purposes only.

Example: Golf 1.6TDI Match

Current CO2 – 108g/km = 29% of P11D Value of £25,640. 2020/21 tax year this will be 30% and frozen at this rate until 2023 20% tax rate employee – £1,538.40 p.a.

WLTP CO2 – 128g/km = 32% of P11D Value of £25,640 20% tax rate employee – £1,640.80 p.a. in 2020/21 rising to £1,743.40 p.a. in 2022/23

An increase of between £102 and £205 p.a. for the same car just because it has been registered after April 2020.

So much for the Treasury stating that the introduction of WLTP would be tax neutral!

With increasing complexity affecting fleet managers, it's more important than ever to make sure your business is operating as efficiently as possible. Working with Expense Reduction Analysts, we can help to protect your business and enable you to gain a competitive advantage. To find out how, contact us today.

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