What is Company Car CO2 Bands (BIK Percentage Bands)?

Full Definition

The taxable benefit-in-kind value of a company car available for private use is calculated by multiplying the car's list price (including most factory-fitted options, known as the P11D value) by an "appropriate percentage" set according to the car's CO2 emissions band, with a separate, generally higher set of bands and a diesel supplement historically applied to non-RDE2-compliant diesel cars. The bands run from a minimum of 3% for zero-emission electric vehicles up to a maximum cap of 37% for the highest-emission petrol and diesel cars, with intermediate bands stepping up roughly every 5 grams per kilometre of CO2 for cars above the very lowest emissions thresholds, and additional bands for plug-in hybrids that further vary the percentage according to the car's electric-only range. The low 3% rate for pure electric vehicles has been a deliberate government policy lever to encourage company car take-up of EVs, since it produces a dramatically lower benefit-in-kind charge than an equivalent petrol or diesel car of similar list price -- for example, an electric car with a £40,000 list price at 3% produces a taxable benefit of £1,200, whereas a petrol car with the same list price at, say, 30% produces a £12,000 taxable benefit, a tenfold difference before Income Tax and Class 1A employer National Insurance are even applied. Government policy has confirmed the EV rate will rise gradually by a small number of percentage points each tax year over the rest of the decade, giving fleet operators and employees several years' notice of the trajectory even as the absolute EV rate remains well below equivalent combustion-engine bands throughout. Because the appropriate percentage is fixed for a given CO2 figure (taken from the car's official WLTP test certificate) regardless of how much the car is actually driven privately, an employee who does very little private mileage still pays the full calculated benefit-in-kind charge unless the car is genuinely unavailable for private use for the whole tax year, making the CO2 band the dominant factor -- far more than mileage -- in deciding which company car is most tax-efficient for a given employee, and explaining why electric and low-emission plug-in hybrid vehicles have become overwhelmingly the most popular company car choices since the bands were restructured.

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