Sometimes shortened to BIK, this is the tax figure that the government feel your company car allowance should be set at. In better words in if the car you drive is paid for by your company, the government see this as personal benefit and will tax you for that privilege. This is still applicable if your company leases its vehicles instead of buying. This can also be applicable if you are the business owner as well as the driver of the car.
The actual BIK figure is based on the specific car you are driving and is now calculated by the CO2 emission figure and the retail price of the vehicle and not the business miles driven as in previous years.
Each vehicle is put into bands from 10% upwards (based on the vehicles CO2 emission) and that percentage is than multiplied by the new retail price of that vehicle.
So for example.
If the vehicle you choose falls within the 10% bracket and has a retail price of £10,000 then the benefit in kind is 10% of £10,000 = £1000.
The actual cost to you is then based on your tax rate, either 20% or 40%.
If you are on the 20% rate, ten you will pay £200 tax on this car per year.
If you are on the 40% rate, then you will pay £400 personal tax on this vehicle each year.
It is worth while noting, that buying the car at a cheaper price than the retail index price, will not reduce your tax liability. Many car manufactures put the “Benefit In Kind Figure” with their price lists now to keep things a bit simpler for you.
You can use the official Government Benefit In Kind calculator for company cars here
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