Company Car Tax (Benefit in Kind) Calculator UK 2026/27
If your employer provides a company car, you pay income tax on the Benefit in Kind (BiK) — the taxable value HMRC assigns to the benefit. For electric vehicles, the BiK rate is just 3% in 2026/27, making them extremely tax-efficient compared to petrol or diesel cars. This calculator shows exactly what you will pay and whether a car allowance might be better value.
BiK rates 2026/27: electric 3%, hybrid varies by zero-emission range. Diesel cars attract a 4% surcharge on top of CO2-based rate (unless RDE2 compliant). Fuel benefit multiplier: £27,800. Employer also pays Class 1A NI at 13.8% on the P11D value. BiK rates for EVs rise to 4% (2026/27) and 5% (2027/28).
BiK Rates by CO2 Emissions 2026/27
| CO2 (g/km) | Petrol BiK% | Diesel BiK% (non-RDE2) |
|---|---|---|
| 0 (electric) | 3% | N/A |
| 1–50 (PHEV: <30 mile EV range) | 14% | 18% |
| 1–50 (PHEV: 30–39 mile EV range) | 12% | 16% |
| 51–75 | 17% | 21% |
| 76–100 | 20% | 24% |
| 101–125 | 23% | 27% |
| 126–150 | 26% | 30% |
| 151–175 | 29% | 33% |
| 176–200 | 32% | 36% |
| 201–225 | 35% | 37% |
| 226+ | 37% | 37% |
Is an Electric Company Car Worth It?
At 3% BiK in 2026/27, electric company cars are one of the most tax-efficient benefits available. A £50,000 Tesla Model 3, for example, generates a taxable benefit of just £1,500/year. A higher-rate taxpayer pays just £600/year in income tax — less than £50/month. Compare this with a petrol equivalent at £50,000 and 150g/km CO2: the BiK would be 26%, generating £13,000/year in taxable benefit and £5,200/year income tax. The saving is extraordinary.
Even as BiK rates for EVs rise (3% → 4% → 5% over the next three years), they remain vastly more tax-efficient than petrol or diesel vehicles with equivalent values. Combined with reduced running costs (home charging vs petrol) and salary sacrifice schemes, EVs represent excellent value as company cars.
Salary Sacrifice for Company Cars
Salary sacrifice car schemes (also called “EV salary sacrifice”) allow employees to sacrifice gross salary in exchange for a company car. This reduces your taxable income and National Insurance contributions. For EVs with 3% BiK, the tax saving on both the reduced salary and the low BiK can make the effective cost of running a new electric car far lower than buying or leasing one privately. Check with your employer’s HR team whether a salary sacrifice scheme is available.
How the P11D Value Is Calculated
The P11D value that determines your BiK tax isn't simply the price you'd pay at a dealership — it's the manufacturer's list price including VAT, delivery charges, and the cost of any factory-fitted optional extras, but excluding the first year's registration fee and the vehicle's road tax. This means two identical cars can have different P11D values if one has additional options like a premium sound system, larger alloy wheels, or an upgraded interior specified when new — even if both were later sold to your employer for a similar negotiated price. Any discount your employer negotiated off the list price doesn't reduce the P11D value used for tax purposes, which often surprises employees who assume their tax is based on what the car actually cost the company to buy.
Company Vans — A Different, Usually Cheaper System
Company vans are taxed under a separate, simpler flat-rate system rather than the CO₂-banded structure used for cars. Most vans attract a fixed annual BiK charge regardless of their emissions or list price, which is typically far lower than the tax on an equivalent company car, particularly for higher-value or higher-emission vehicles. Zero-emission vans currently attract no BiK charge at all. If your van is used only for business journeys and ordinary commuting, with no other significant private use, no BiK charge applies at all — this is a key distinction from cars, where even minimal private use (such as driving home) typically triggers the tax. If you also get free fuel for private use in a van, there's an additional flat-rate fuel benefit charge, again separate from and generally lower than the equivalent car fuel benefit charge.
Frequently Asked Questions
A P11D is a form employers submit to HMRC each year showing the value of benefits provided to employees, including company cars. The P11D value of your car (its list price including options) is used to calculate your BiK taxable benefit. HMRC adjusts your tax code to collect the BiK tax through PAYE. You should receive a P11D or P11D(b) notification each year showing the taxable benefit applied.
As an employee, you do not pay employee NI on company car BiK — it is taxed through income tax only. However, your employer pays Class 1A National Insurance at 15% (2025/26 onwards) on the P11D value of your car. This is a cost to the employer, not you. Salary sacrifice schemes can reduce this cost for the employer, which is why many employers are willing to offer them.
This is entirely down to your employer's own car scheme policy, not a legal requirement — some employers offer a wide choice across any make and model within a budget, while others operate a restricted "choice list" of pre-approved vehicles, often skewed towards low-emission and electric models to minimise both the employee's BiK tax and the employer's Class 1A NI cost. It's worth checking your specific scheme rules, since the tax calculation itself works the same way regardless of which car you're offered — what varies is simply which cars you're allowed to pick from.
Company car benefit is treated as part of your income for tax credits and some means-tested benefit calculations, so it can reduce entitlement to benefits that are assessed against gross taxable income. This is worth factoring in if you're weighing up a company car (or salary sacrifice arrangement) against taking a higher cash salary instead, particularly if you or your household receive income-related benefits or tax credits.