Is a company car, van or pick-up truck cheapest for BIK tax?

If you drive for your job, your employer might offer you a company car – but would a company van or pick-up truck save you loads of money on your tax bills? We have the answer.....

VW Multivan, Seat Ateca and VW Amarok

If you're offered a company car, it’s a no-brainer to take it, right? Wrong. Depending on the model you choose, a fleet car isn't necessarily that cheap in company car tax.

To keep costs down, you can follow our tips for cutting BIK tax – and you could also look into getting a van or a pick-up truck as your fleet vehicle.

It’s worth thinking about, because they could end up costing you much less in BIK tax payments. And while you might not expect a van or pick-up to be as convenient or good to drive as a car, you might be pleasantly surprised by how advanced and easy to handle the latest models are.

Here we take you through the three options to help you decide whether to get a company car, van or pick-up truck...

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The BIK costs of running a company car

Companies offer staff company cars because, first and foremost, it allows their employees to run new cars, which makes them feel valued and allow them to carry out their work journeys in safe, modern vehicle. It also means that when their workers meet prospective clients, they make a good impression in a smart fleet car.

However, the downside as far as the staff member is concerned is that His Majesty’s Revenue and Customs (HMRC) sees the vehicle as a benefit in kind, and will tax them on it. To find out more about that, see our BIK tax guide.

How much that monthly bills is depends on a few factors – namely what fuel the car runs on, how efficient it is, and which tax band the staff member is taxed in.

For example, a BMW X1 sDrive18d M Sport Sport Auto emits 133g/km of CO and will cost a 20% taxpayer £209 in company car tax each month. However, a plug-in hybrid (PHEV) Toyota C-HR will cost a 20% taxpayer just £52 per month.

Meanwhile, a pure-electric BMW iX1 66kWh eDrive M Sport will cost that same taxpayer just £17 per month. The savings for electric company car users are huge, as long as your employer is willing to take on the higher leasing cost of the electric vehicle.

Read more: Is it worth getting a company car?

The BIK costs of a company van or pick-up truck

Tax on a company van or pick-up is comparatively straightforward, because if a vehicle is classed as either of these, it is subject to a flat rate of tax of £3,960 per year.

So, if you’re a 20% taxpayer, you’ll pay tax on 20% of £3960, which is £792. Divide that by 12 and you have a monthly payment of £66. If you’re a 40% taxpayer, you’ll pay £132 per month.

Both are less than you would pay for most petrol or diesel-powered company cars. And if you choose an electric van, you’ll pay precisely nothing in company car tax or annual VED.

To qualify as a van, a vehicle should weigh no more than 3,500kg, and a pick-up truck must be a single-cab model that weighs no more than 3,500kg and be able to carry a payload of 1,000kg.

Use our company car tax calculator

Company car, van or pick-up truck – conclusion

So, unless you choose an electric or PHEV company car, a pick-up truck or a van will cost you less in BIK tax each month. That flat rate of £66 per month is much lower than you would pay on a diesel or petrol-powered company car.

For example, a BMW 116d M Sport Auto will cost you £164 each month, and it won’t be able to carry nearly as much as a van or pick-up.

Yes, a modern PHEV will be slightly less in BIK each month, but that’s where the van world hits back, because an electric van qualifies for BIK and VED of £0.

If all you’re concerned about is keeping your monthly company car tax bill down, and if the plug-in option is tricky for you, a van or pick-up represents an ideal way to do so.

Read more: The best company cars

Read more: Can I use a company car for personal journeys?

Read more fleet and company car advice

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