Benefit in Kind Explained on Electric Company Cars

Understand how benefit in kind tax works for electric cars, hybrids and company vehicles. Includes tax comparisons and current BIK rates.

Electric vehicles (EVs) have gained huge popularity in the UK, not just for their environmental credentials, but for the generous tax savings they offer — particularly through low Benefit in Kind (BIK) rates. If you're an employer offering company cars, or an employee considering one, understanding how BIK works is key to getting the most value from electric or hybrid vehicles.

Here’s what you need to know about BIK, electric cars, and how company car tax applies today.

What Is a Benefit in Kind?

A Benefit in Kind (BIK) is any non-cash benefit an employee receives from their employer — in other words, something of value other than salary. HMRC considers these perks as taxable benefits.

Company cars are one of the most common examples of a BIK. If an employee has personal use of a vehicle provided by their employer, it’s classed as a benefit and taxed accordingly.

Is an Electric Car a Benefit in Kind?

Yes. If an employer provides an electric car for an employee to use — and that includes any personal use — it counts as a Benefit in Kind. That means the employee will be taxed on it, just as they would with a petrol or diesel car.

However, electric vehicles attract much lower BIK tax rates than traditional cars. This makes them an attractive option for employees and a smart tax-efficient offering for employers.

Is 'Company Car Tax' the Same as 'Benefit in Kind'?

In practice, yes. Company car tax is the tax an employee pays for the personal use of a company car. It’s based on the BIK value of the vehicle, which depends on several factors including:

  • The car’s P11D value (list price including VAT and delivery)

  • Its CO2 emissions

  • Its fuel type

  • The applicable BIK percentage rate

So while “company car tax” is the casual term, it's actually a tax applied to a Benefit in Kind.

How Does Company Car Tax Work?

To calculate company car tax, follow these steps:

  1. Multiply the car’s P11D value by the BIK percentage rate set by HMRC for the specific car.

  2. Multiply the result by the employee’s income tax rate (20%, 40%, or 45%).

This gives you the amount of tax the employee will pay each year for having the car as a benefit.

How Much Tax Is on Electric Company Cars?

As of the 2024/25 tax year, the BIK rate for fully electric cars is 2%. This is set to rise slowly, with confirmed rates reaching 5% by the 2027/28 tax year — still well below petrol and diesel rates.

For example:

  • An electric car with a P11D value of £35,000

  • BIK rate: 2%

  • Employee pays 20% tax

BIK value: £35,000 × 2% = £700
Tax payable: £700 × 20% = £140 per year (or around £11.67/month)

Compare that to a petrol car...

Example: Company Car Tax – Petrol vs Electric

Petrol car:             

  • P11D value: £35,000

  • CO2 emissions: 135g/km

  • BIK rate: 30%

  • Employee tax rate: 20%

BIK value: £35,000 × 30% = £10,500
Tax payable: £10,500 × 20% = £2,100 per year

Electric car (same P11D value):

  • BIK rate: 2%

  • Tax payable: £140 per year

That’s a saving of £1,960 per year — just from choosing electric over petrol.

What Is the BIK on Hybrid Company Cars?

BIK for plug-in hybrid electric vehicles (PHEVs) is based on CO2 emissions and electric-only mileage. The lower the emissions and the greater the electric range, the lower the BIK rate.

For the 2024/25 tax year:

  • CO2 emissions under 50g/km

  • Electric range 130 miles or more → BIK rate = 2%

  • Electric range 40–69 miles → BIK rate = 8%

  • Electric range under 30 miles → BIK rate = 14%

Hybrid company cars still offer savings, but they don’t beat fully electric vehicles for tax efficiency.

Are Electric Vans Liable to Company Car Tax?

Electric vans are treated slightly differently. If an employee uses a zero-emission van for personal use, the BIK tax charge is £0 — meaning there’s no tax to pay at all.

This exemption makes electric vans extremely tax-efficient, especially for sole traders or employees who use vans for both business and personal reasons.

Petrol and diesel vans, by contrast, have a fixed BIK charge (just over £3,000 as of 2024/25), taxed at the employee’s income tax rate.

Final Thoughts

Electric vehicles aren’t just good for the environment — they’re also one of the most tax-efficient benefits you can offer or receive. With a BIK rate of just 2%, company car tax on EVs is minimal compared to petrol, diesel, or even hybrid alternatives.

If you're an employer, offering electric cars can reduce payroll tax exposure. If you're an employee, choosing one could save you hundreds — if not thousands — each year.