Company motorbikes: how the benefit is taxed

A motorbike is not a car for benefit in kind purposes, because section 115 of ITEPA 2003 excludes motor cycles from the definition, so there is no CO2 percentage and no fuel benefit charge. Instead the general asset rule in section 205 applies: the employee is taxed each year on 20% of the bike’s market value when it was first provided as a benefit, or the hire charge if higher, plus the running costs the employer pays.

Why are motorbikes outside the company car rules?

Section 115(1) defines a car as a mechanically propelled road vehicle which is not a goods vehicle, a motor cycle, an invalid carriage or a vehicle of a type not commonly used as a private vehicle. A van is likewise defined to exclude motor cycles. “Motor cycle” takes its meaning from section 185(1) of the Road Traffic Act 1988: a mechanically propelled vehicle, not being an invalid carriage, with fewer than four wheels and an unladen weight not exceeding 410 kilograms.

So a scooter, a commuter bike or a large touring motorcycle all fall outside the car and van benefit code, and outside its special features: list price, CO2 bands, electric range, the car fuel benefit charge and the pool car exemption. HMRC’s Employment Income Manual at EIM21878 names a motorcycle as an example of an asset dealt with under the general rules for assets made available without transfer. A three wheeled vehicle over the weight limit, or a four wheeled one, is not a motor cycle and needs to be tested against the car definition instead.

How is the benefit worked out instead?

Section 203 treats the cash equivalent of an employment related benefit as earnings, being its cost less anything the employee makes good to the provider by 6 July after the tax year. Where the benefit is the use of an asset that stays the employer’s property, section 205 sets the cost. Under section 205(2) the annual cost is the higher of:

• the annual value of the use of the asset, which section 205(3) fixes at 20% of its market value when the provider first applied it in providing an employment related benefit; and
• any rent or hire charge the provider pays for it,

in each case plus any additional expense. HMRC’s guide 480 at paragraph 6.7 describes the same rule: annual value or hire charge if greater, plus current expenditure met by the employer.

The market value is fixed when the bike is first used to provide a benefit to anyone. Section 205(3)(b) applies that value whether or not the person first given the benefit is the current employee, so a three year old bike passed to a new rider is still valued at 20% of what it was worth when first provided, not its depreciated value.

Which running costs are added?

Section 205(4) defines additional expense as the expense incurred in or in connection with providing the benefit, apart from the cost of acquiring the asset and any rent or hire charge. Insurance, servicing, repairs, tyres and fuel paid for by the employer therefore increase the benefit.

This is a real difference from cars. Section 239 stops employer paid running costs being taxed separately for a taxable car or van, but it does not mention motorcycles, and GOV.UK’s statement that employers do not pay National Insurance on car running costs such as servicing and insurance relates to cars. For a company motorbike those costs sit inside the section 205 figure.

Is business use taken into account?

Not through mileage. Guide 480 paragraph 6.7 says an employee cannot deduct business use of an asset under the expenses rule. Instead, section 205A reduces the annual cost for days the bike is unavailable for private use. A day counts if it falls before the bike is first available or after it is last available, if for more than 12 hours the bike is unfit for use, being repaired, unable lawfully to be used or in someone else’s possession under a lien, or if on that day the employee uses it only to perform the duties of the job.

The deduction is the annual cost multiplied by the number of unavailable days over the days in the year. Keeping a simple diary of business only days can therefore cut the charge.

Two further rules help. Under section 205(1B), if the terms prohibit private use and there is none, the bike is not treated as available for private use. And under section 205B, if several employees have private use of the same bike at the same time, the total charged is limited to one annual cost and divided on a just and reasonable basis, much like company cars shared between employees.

How does a worked example look?

Illustration only. In April 2026 an employer buys a new motorbike worth £12,000 and gives it to a field engineer for the whole of 2026 to 2027. The employer pays £600 for insurance, £400 for servicing and £500 of fuel. The engineer’s diary shows 73 days on which the bike was used only for work. The engineer repays £200 by 6 July 2027 under an agreement to contribute.

Step	Amount
20% of £12,000 market value	£2,400
Add additional expense (£600 + £400 + £500)	£1,500
Annual cost	£3,900
Less business only days: £3,900 x 73/365	(£780)
Less amount made good	(£200)
Cash equivalent	£2,920

A higher rate taxpayer pays £1,168 at 40%, and the employer pays Class 1A National Insurance of £438 at the 15% rate for 2026 to 2027.

What about mileage payments and parking?

• Mileage allowances. Section 230 sets the approved mileage allowance rate for motor cycles at 24p a mile, but section 229(4) disapplies the exemption for a company vehicle. Section 236(2) includes a vehicle taxed under section 203, so a company motorbike does not qualify. The 24p rate is for employees using their own bikes; see mileage allowance payments.
• Parking. EIM21685 confirms that a motorcycle parking space at or near work is exempt under section 237.
• Cycle to work. The section 244 exemption uses the Road Traffic Act meaning of cycle, which excludes motor vehicles, so it does not cover motorbikes or mopeds.

What if the employee buys the bike?

Section 206 values a used asset transferred to an employee at the higher of its market value at transfer and its market value when first provided as a benefit, less the amounts already charged under section 205. Cars, some computers and cycles are excluded from the higher of rule by section 206(6), but motorbikes are not, so selling a lightly used bike cheaply can leave a further charge.

How is it reported, and what goes wrong?

The benefit goes in the use of assets section of the P11D at its gross figure (guide 480 paragraph 25.12), or through payroll. See benefits in kind and P11Ds, payrolling benefits in kind and Class 1A National Insurance. Common errors are:

• using the car percentage tables for a motorbike;
• leaving out insurance, servicing and fuel, which are taxable here;
• revaluing the bike each year instead of using the first provided value;
• paying 24p a mile tax free for a company bike; and
• selling the bike to the employee at its current value without checking section 206.

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Related Accountapedia entries

• How rental income is taxed
• How a SIPP is taxed
• Company van benefit and van fuel benefit
• How is crypto held by a company taxed
• Accounting for employee benefit trusts

Sources

• legislation.gov.uk: Act 2003 c. 1, section 115
• legislation.gov.uk: Act 1988 c. 52, section 185
• GOV.UK: Manual page EIM21878
• legislation.gov.uk: Act 2003 c. 1, section 203
• legislation.gov.uk: Act 2003 c. 1, section 205
• GOV.UK: Valuation of company benefits 480 chapter 6
• legislation.gov.uk: Act 2003 c. 1, section 239
• GOV.UK: Work out the value
• legislation.gov.uk: Act 2003 c. 1, section 205A
• legislation.gov.uk: Act 2003 c. 1, section 205B

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.