Thinking about a company car? Then you’ve probably heard of Benefit in Kind (BIK). But with changes coming into effect from April 2025, it’s more important than ever to understand how BIK impacts your costs.
At Car Leasing Made Simple, we believe in keeping things simple—so we’ve broken down the upcoming BIK tax changes and what they mean for you. If you’re considering leasing an electric vehicle (EV) or another company car, this guide will help you make a smart, tax-efficient decision.
We’ll cover the key changes, how BIK is calculated, and why leasing an electric vehicle remains the best option for tax savings.
1. What’s Changing with BIK in April 2025?
From April 2025, the BIK rate for electric vehicles (EVs) will rise from 2% to 3%, with further increases planned:
| Tax Year | EV BIK Rate |
| 2024/25 | 2% |
| 2025/26 | 3% |
| 2026/27 | 4% |
| 2027/28 | 5% |
While these increases remain low compared to petrol and diesel cars, they will slightly raise the tax cost for EV drivers. Petrol and diesel company cars will continue to attract higher BIK rates of 25-37%, meaning EVs remain the most tax-efficient choice.
Why Does This Matter?
- If you currently lease an EV, your BIK tax will increase slightly in 2025.
- However, compared to petrol or diesel models, the savings remain significant.
- If you’re planning to lease a new company car, choosing an EV before April 2025 locks in a lower rate for the remainder of your lease term.
2. How is BIK Tax Calculated for Company Cars?
Your BIK tax bill is based on four simple factors:
- The car’s P11D value – This is the list price, including VAT and optional extras, but excluding registration fees and road tax.
- CO₂ emissions – The government sets BIK rates based on how polluting a car is.
- BIK percentage rate – This is linked to emissions and fuel type (EVs get the lowest rate).
- Your income tax band – Whether you pay 20%, 40%, or 45% tax affects the total you owe.
Let’s compare a petrol car vs an EV under 2025/26 rates:
| Factor | Petrol Car (Ford Focus 1.5L) | Electric Car (Tesla Model 3) |
| P11D Value | £30,000 | £40,000 |
| CO₂ Emissions | 120g/km | 0g/km |
| BIK Rate (2025/26) | 29% | 3% |
| BIK Value | £8,700 | £1,200 |
| Tax at 20% | £1,740 per year | £240 per year |
| Tax at 40% | £3,480 per year | £480 per year |
Key takeaway:
- Even with the increase to 3% in 2025, EVs remain the best choice for low BIK tax.
- The EV still saves over £1,500 per year in tax for a 20% taxpayer compared to a petrol car.
3. How Can You Reduce BIK Tax on a Company Car?
Want to keep your BIK bill low? Here’s how:
1. Lease an Electric Vehicle (EV) Before April 2025
Lock in the 2% BIK rate before the increase to 3%.
2. Choose a Lower-Emissions Car
The less CO₂ your car emits, the lower your tax rate.
3. Make a Personal Contribution
If you chip in towards the company car, your taxable amount goes down.
4. Use Your Car for Business Trips
The more business mileage you do, the lower your personal use tax liability.
5. Lease Instead of Buying
Leasing lets you switch to newer, greener cars regularly—keeping your BIK rate as low as possible.
4. Is It Better to Buy or Lease a Company Car for BIK Savings?
For simple BIK savings, leasing wins. Here’s why:
| Factor | Leasing a Company Car | Buying a Company Car |
| Initial Cost | Low upfront cost | Large deposit required |
| Tax Benefits | Lower BIK on EVs | Higher tax liability |
| Flexibility | Upgrade every few years | Stuck with an older car |
| Maintenance | Often included in lease | Extra cost for servicing |
| Cash Flow | Predictable monthly payments | Capital tied up |
Leasing an electric company car means:
- Lower monthly costs.
- The lowest possible BIK rates.
- No worries about depreciation.
Final Thoughts
The upcoming April 2025 BIK changes will see EV tax rates increase slightly, but they remain the most cost-effective company car choice.
At Car Leasing Made Simple, we specialise in low BIK company cars, including EVs and hybrids, to help businesses and employees keep things simple and save money.
🚗 Looking to lease a tax-friendly company car before the 2025 changes? Get in touch today and let’s make car leasing simple!
