The tax liability if an employee receives a company car as a job perk, based on the car's value.
Benefit in Kind (BIK) refers to a term commonly used in the UK to describe the taxable benefits that employees receive from their employers in addition to their salary, specifically related to the use of a company car.
In the context of car-related benefits, BIK is calculated based on the car's list price, CO2 emissions, and fuel type. The higher the list price and CO2 emissions of the car, the higher the BIK value. This means that employees who receive a company car as part of their employment package may be liable to pay additional tax on the value of this benefit.
The BIK tax is deducted from an employee's salary through the Pay As You Earn (PAYE) system, and the amount depends on the individual's income tax bracket. The BIK tax is typically paid annually or monthly, depending on the employer's arrangement.
It's important for UK drivers to understand BIK as it directly affects their take-home pay and tax obligations. By being aware of the BIK value associated with their company car, drivers can better plan their finances and understand the potential impact on their overall income and tax liabilities.