Company car tax is a tax on the “Benefit in Kind” that an employee is receiving through the provision of a car for their personal use.

Benefit in Kind (BiK)

When a car is provided for an employee by their employer that is available for personal use, the employee must pay some tax on the effective benefit that they receive for this.

HM Treasury calculates how much benefit they receive, based on a percentage (BiK rate) of the car’s “P11D” value (see below), compared to just receiving an equivalent amount in pre-income tax pay.

The government can set BiK rates to encourage employers and company car drivers to choose vehicles with lower CO2 emissions like fully electric cars or plug-in hybrids.

P11D Value

Named after a form filed by employers and sent to the tax office with which their Pay As You Earn scheme is registered, the P11D value of a car is comprised of:

• Vehicle list price
• Optional extras
• Delivery fees
• Value Added Tax (VAT)

Employer’s National Insurance

As well as the employee paying BiK tax on their car, the employer must also pay employer’s national insurance on the car’s BiK value, which is currently set at 13.8%.

As around 50% of new cars are obtained by companies, BiK represents a very potent lever available to the government to encourage adoption of the low and zero emission vehicles, especially as BiK makes a significant difference to an individual’s monthly wages.

• The HM Treasury is strongly incentivising full battery electric vehicles (BEVs) using these tax rates, and offers a more modest incentive on plug-in hybrid electric vehicles (PHEV).
• With all BEV drivers paying just 2% in 2022-23, and the company car tax rate on electric cars frozen until at least 2025, a further increased uptake of fully electric company cars is to be expected.

Learn more about installing workplace EV charging

Tax for Electric Company Vans

If your company provides you with a zero emission van for personal use, that van is not subject to a van benefit charge. For all other vans the charge is currently set at £3,960 for the 2023-24 financial year. 
 

This is set to change in 2025, at which point government wants to align the charge for pure electric vans with all other vans.

Emission figures test procedure

CO2 figures used to determine company car tax rates are based on the Worldwide Harmonised Light vehicles Test Procedure (WLTP), which aims to accurately measure emissions and fuel efficiency.

For cars registered before April 2020, tax rates are still determined from figures based on the outdated NEDC testing procedure. 
 

* For more information on "WLTP", "NEDC" and more, please visit our Electric Vehicle Dictionary.

The table below shows the percentage BiK rates, depending on vehicle CO2 emissions from conventional fuel (only >0 for PHEVs) and using WLTP figures. The table represents electric, petrol and diesel related BiK rates. 

The BiK rates are currently frozen until 2025, meaning for zero emission vehicles you'll pay 2% until then. The rate is then set to rise by 1 percentage point across everything except the most polluting cars which will stay at 37%.
 

Note: You should add 4% up to a maximum of 37% for diesel cars that are not certified to the Real Driving Emissions 2 (RDE2) standard.

How do you calculate BiK on an electric car?

BiK is taxed according to your income tax banding. In order to work out the BiK tax an employee has to pay, you need to calculate the value of the benefit in kind:

P11D value x BiK rate = BiK value

Worked example from 23rd July 2024

A new Nissan LEAF Acenta has a P11D value of £28,440 and (as a BEV) emits 0g/km of CO2, putting it in the 2% BiK band (percentage rate based on its CO2 emissions). 

To get the amount your company car will cost you in tax per year, you then multiply the BiK value by your income tax banding (20-45%).
 

In 2024-25, the BiK value will be £28,440 x 2% = £568.80

• £568.80 x 20% = £113.76 per year / £9.48 per month
• £568.80 x 40% = £227.52 per year / £18.96 per month
• £568.80 x 45% = £255.96 per year / £21.33 per month

It is clear that the difference that employees pay for company car tax on electric cars is very significant, when compared with a conventionally fuelled equivalent.

Comparison of BEV vs ICE from July 2024

Browse our guides to compare electric vehicles and discover their BiK rates and other helpful stats.

Does BiK get added to your salary?
 

No, Benefit in Kind (BiK) doesn’t get added to your salary. Instead, it is a tax on some benefits you may receive from your employer, like a company car, and usually collected through PAYE (pay-as-you-earn).
 

Is BiK paid before tax?
 

Yes, BiK is paid before tax is deducted from your salary. In the case of a company car, the vehicle is treated as taxable income, but not directly included in your salary.

How do I report BiK to HMRC?

It is the employer's responsibility to accurately report any Benefit in Kind to HMRC. If you’re an employee and receive a company car as a Benefit in Kind, you’re not responsible for reporting it for tax purposes.

A salary sacrifice scheme is an arrangement that allows an employee to exchange part of their salary in return for some form of non-cash benefit from their employer.

These schemes are commonly used for employees to receive benefits such as childcare vouchers and pension contributions. Some businesses also offer car leasing through salary sacrifice, with EVs being particularly popular in recent years.

The cost of leasing an EV is deducted from the employee's gross salary, which is before tax and National Insurance contributions are calculated. This results in tax savings for the employer and employee, and makes this option around 30 to 60% cheaper than private leasing.

As an employer, offering an EV salary sacrifice scheme can increase the appeal of your business to future and current employees. In a competitive talent market, benefits like this one will help you stand out among other businesses.

Key business benefits of an EV salary sacrifice scheme:

1. Attract new talent: Salary sacrifice, especially with the option to lease an electric car, could be a standout feature in the benefits package you advertise and offer.

2. Improve employee retention: Boost satisfaction and increase loyalty among existing staff by offering a salary sacrifice scheme. It makes driving an electric car more affordable while reducing taxable income – a win-win for your employees.

3. Support your green values: Many businesses have commitments or values related to sustainability. Offering EVs via salary sacrifice offers a great opportunity to lead by example and support your green ambitions.

4. Save National Insurance: The deduction made from an employee’s gross salary reduces National Insurance contributions for the employee as well as the employer.

As an employer, you’ll have to partner with one of the many companies facilitating EV salary sacrifice schemes. Once you have signed your business up to a scheme, the provider will typically handle the rest:

• Advice on how to promote the scheme to employees

• Support employees during the EV selection process, including organising test drives

• Allow your employees to manage the scheme online or over the phone

Some providers may even offer reduced energy tariffs, free public charging or perks like free home chargers for employees who lease a car through your salary sacrifice scheme.

Depending on which scheme provider your business partners with, you may pay little to no fees as an employer to offer salary sacrifice to employees. It’s another reason why EV salary sacrifice has become so popular in recent years.

As staff sacrifice from their gross salary, the portion eligible for National Insurance (NI) contributions is decreased, meaning both the employer and employee pay less NI.

You can find more information about salary sacrifice on the government’s website.

EV salary sacrifice is a standout benefit that employers can offer as part of a wider benefits package. It creates savings for employers and can be an excellent perk to attract and keep talent in the business at no extra cost to you.

Whether you’re a small business or large corporation, you should consider joining an EV salary sacrifice scheme to enhance your employee benefits, save on NI contributions, and support your environmental commitments as a business.

Domestic installations cover the fitting of chargepoints for use at homes. They are used exclusively by homeowners and their visitors. Installations are carried out by Pod Point Experts who are highly trained and experienced electricians. Most homechargers are installed on the exterior of the property, or inside the garage.

By comparison, commercial and workplace charging installations will either be used by:

• The company’s employees

• Fleet vehicles

• Customers

As such, they tend to be more complex than home installations as commercial chargers are required to have additional technologies to install and operate.

To overcome this added complexity, commercial installations are overseen by a Pod Point Project Manager who liaises with all the stakeholders/parties involved to ensure the installation is completed correctly.

Externally, there is very little difference between a domestic and a commercial Solo charger. But internally, commercial chargepoints are made up slightly differently to satisfy regulatory requirements, which is why a business can’t simply get a domestic charger installed, or vice versa.

On the other hand, Twin Chargers can only be used for commercial installations. Homes wanting more than one chargepoint will need to purchase multiple Solo chargers.

But there are other factors involved that require domestic and commercial installations to have different processes.

A normal home installation typically takes around 2 hours to complete. This is because domestic installations tend to follow a similar procedure. This is why Pod Point is able to offer a single standard installation package for homes, and why home installs are cheaper than commercial installs.

For starters, most properties in the UK with off-street parking only have a single space, which is why the majority of domestic installations are for a standard single-socket charger. The charge point is usually installed to the exterior of the property.

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Whether using a mount or fixing to a wall, the chargepoint is connected directly to the property’s power supply. In most homes, this is within 15m of the chargepoint’s location, which negates the need for any groundworks. This means home installations only require a single engineer to complete the work.
 

Also, domestic installations can come straight off the home’s electric meter, which is often easy to route from. By comparison, commercial installations need to come from the fuse board, which is typically located in the middle of the property.

Additionally, most standard home consumer units run on single-phase power, whereas commercial distribution boards typically have three-phase power. As a result, home power supplies are typically smaller and easier to work with.

Whilst most home installations are fairly identical, business installations can vary significantly, especially in terms of scale.

Business premises usually have multiple bays, sometimes spread out across different storeys of a car park. This in turn means they need to provide charging for many users at the same time.

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As a result, business installations will rarely involve just one or two chargepoints. Naturally, a higher number of chargepoints being installed makes for a more complicated and expensive installation process.

Also, unlike home installations, the parking bays are rarely located close to the premises’s power supply or a permanent wall. To overcome this, groundworks are often needed to trench the cables underground so they don’t get damaged by the elements or vehicles.

This adds an extra layer of complexity, but also time, with groundworks typically spanning multiple days depending on the size of the car park.

EV drivers typically plug their vehicles in to charge overnight so they have a full battery at the start of the day. Because of this, a 7kw charger is usually more than sufficient to cover any charging taking place at home.

But businesses have different requirements depending on who the chargepoints are being used by. This in turn impacts what power rating(s) they choose to install. In some instances, sites may find a mixture of power ratings more appropriate, which results in a more complex installation process:

Workplace charging

Workplaces may also need a variety of power ratings depending on business hours and shift patterns.

For businesses where employees are at work for a full 8 hour day - whether during the day or overnight - a 7kW power rating is more than sufficient as their EVs will be plugged in for extended periods of time.

However, not all employees will be parked for the entire time, which is where a mixture of 7kW and 22kW (or even higher) power ratings would be beneficial. This way, employees who frequently need to drive to and from the office can get a quick top-up charge.
 

Fleet charging

Businesses with a fleet of vehicles may find a mixture of power ratings more appropriate. 7kW chargers will still be useful to allow for overnight charging, but faster chargers with power ratings of 22kW+ may also be desired to give a faster top-up charge in between deliveries.

Unlike homes, most businesses run on three-phase power, which can handle the higher load demands from faster chargepoints. However, the power supply may need to be upgraded to accommodate multiple chargers, depending on the size of the business and its on-site power availability.

A business providing charging for its customers will choose its power rating based on average dwell times. For example, 7kW chargers would be suitable for premises where customers are expected to be for long periods of time such as airports, hotels, or venues like football stadiums or zoos.

But some public destinations like supermarkets and shopping centres have a broader range of dwell times. In these instances, a mixture of fast and rapid chargepoints would be more beneficial to cater to both long-stay customers - where 7kW may be sufficient - and those visiting for a short period who may need a faster charge.

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Regulatory differences

Domestic and commercial chargepoints have to satisfy different regulations set by OZEV. Commercial chargers in particular have a broader range of regulations they need to adhere to.

1. Businesses must be able to restrict usage to different usage groups, e.g employees, customers etc. Domestic chargepoints don’t need this, as they’re only used by one user.

2. Commercial chargepoints must have the ability to charge the end user a fee for usage to cover business electricity costs. Some public chargepoints are free to use, but they must have the functionality to set a custom tariff if desired. This is done through Pod Point’s back-end Site Management Service .

3. Home chargepoints need to have smart functions, but these can all be accessed by the user with the Pod Point App. This gives full visibility on their energy usage, as well as the ability to set repeating schedules with Charge Scheduling.

4. If a business installs a domestic chargepoint, the warranty will be invalid.

5. Contractors need to sit additional qualifications to work on business premises, which is monitored by OZEV through their WCS-approved installer scheme.

OZEV offers different grants for home and business chargers. The main grants available are:
 

• The Workplace Charging Scheme (WCS), which is also available for any business, charity, or public authority.

• The EV infrastructure grant for staff and fleets.

• The EV chargepoint grant for residential and commercial landlords, social housing providers, and property factors.

• The EV chargepoint grant for flat owner-occupiers and people living in rented properties.

• The EV chargepoint grant for state-funded schools.

As a result, businesses wanting to install chargepoints will have to opt for chargers on OZEV’s commercial-approved list in order to claim the relevant grant.