What is BIK Tax?

What is BIK tax? It’s a form of tax that is paid on a company vehicle if you choose to use it for personal use. Find out below if you are required to pay it and how to go about it.

BIK stands for benefit-in-kind and is a form of tax that is payable by employees who use their company vehicle or van for personal use.

When a vehicle is used for personal use, it is then classed as a benefit that isn’t included in their taxable salary. So that is some clarification for employees, but what happens when you are the employer, or if you are self-employed?

Employers and BIK

As an employer, if you are providing vehicles to your employees that will be used for both business and personal use, you will be required to report this. You will have to issue a report in the form of Class 1A NIC and P11D. You must ensure that you have completed these reports and that your employees are aware that they will have to pay BIK tax on their vehicle if they use it for personal journeys that fall outside ‘incidental’ usage, which is a grey area but is loosely described as the odd journey that was unavoidable.

Self-employed workers and BIK

If you are self-employed or registered as a sole trader, then you may be wondering whether BIK tax is something you should be paying. The short answer is, no, it is not. Your van will be an expensed asset or on a van lease and is treated differently if you are self-employed as a sole trader. So, you can continue to drive happy in your vehicle.

If you are unsure whether you should be paying BIK tax, it is a good idea to get in touch with HMRC and find out. They have many resources on the website and a helpline if you have more specific questions that need to be answered.

Business or pleasure, if you are looking for a used van in Cumbria, get in touch with the team at Eden Commercials where the team will be happy to help you.