How company car tax works
A company car you can use privately is a taxable benefit. The taxable value is the car's P11D value (its list price including options and VAT) multiplied by a BIK percentage set by its CO2 emissions. You pay income tax on that amount at your own rate.
Annual tax = P11D value × BIK % × your tax rate
For example, a £40,000 electric car in 2026/27 has a BIK rate of 4%, so the taxable benefit is £1,600. A basic-rate taxpayer pays 20% of that: £320 a year, or about £27 a month. The same driver in a £40,000 petrol car at 130g/km (32%) would pay £2,560 a year.
BIK rates for 2026/27 and 2027/28
| CO2 (g/km) | Electric range | 2026/27 | 2027/28 |
|---|---|---|---|
| 0 | Fully electric | 4% | 5% |
| 1 to 50 | 130 miles or more | 4% | 5% |
| 1 to 50 | 70 to 129 | 7% | 8% |
| 1 to 50 | 40 to 69 | 10% | 11% |
| 1 to 50 | 30 to 39 | 14% | 15% |
| 1 to 50 | Under 30 | 16% | 17% |
| 51 to 54 | 17% | 18% | |
| 55 to 59 | 18% | 19% | |
| 60 to 64 | 19% | 20% | |
| 65 to 69 | 20% | 21% | |
| 70 to 74 | 21% | 21% | |
| 75 to 79 | 21% | 21% | |
| 80 to 84 | 22% | 22% | |
| 85 to 89 | 23% | 23% | |
| 90 to 94 | 24% | 24% | |
| 95 to 99 | 25% | 25% | |
| Then +1% per 5g/km | up to 37% | up to 37% | |
| 155 and above | 37% | 37% |
For cars registered from 6 April 2020. Diesels that do not meet RDE2 add 4%, up to the 37% maximum.
Why electric company cars are so popular
At 4% in 2026/27, rising by one point a year to 5% in 2027/28, an electric car's benefit is a fraction of a petrol car's. Many employers also offer electric cars through salary sacrifice, which can lower income tax and National Insurance further. Your employer also pays Class 1A National Insurance on the benefit, at 15%.
Reducing your company car tax
- Choose a lower-CO2 car, or an electric car.
- For a plug-in hybrid, a longer electric range drops the BIK rate a lot: 70 miles or more cuts it from 16% to 7%.
- Payments you make towards private use reduce the taxable benefit pound for pound.
- Fuel your employer pays for private mileage is taxed separately under the car fuel benefit charge, so it is often cheaper to pay for your own private fuel.
Sources
- GOV.UK: Company car tax rates (Appropriate percentages)
- GOV.UK: Tax on company benefits
- Intelligent Vehicle Finance: BIK rates 2026/27 to 2029/30
Rates and rules last checked 15 October 2026. These figures are a guide. For a decision that matters, confirm with the official source.