A company car is taxed as a benefit in kind: the car’s P11D value is multiplied by an appropriate percentage set by its CO2 emissions, and the result is added to your income and taxed at your marginal rate. In 2026/27 the percentage is 4% for an electric car, between 4% and 16% for a plug-in hybrid depending on its electric range, and from 17% at 51 g/km up to 37% at 155 g/km and above, with 4% added for older diesels. A £45,000 electric car costs a higher rate taxpayer £60 a month; a £30,000 petrol car at 120 g/km costs the same driver £300 a month. The employer pays Class 1A National Insurance at 15% on the same benefit figure.
The appropriate percentages for 2026/27
| CO2 emissions | Electric range | Percentage |
|---|---|---|
| 0 g/km | any | 4% |
| 1 to 50 g/km | 130 miles or more | 4% |
| 1 to 50 g/km | 70 to 129 miles | 7% |
| 1 to 50 g/km | 40 to 69 miles | 10% |
| 1 to 50 g/km | 30 to 39 miles | 14% |
| 1 to 50 g/km | under 30 miles | 16% |
| 51 to 54 g/km | 17% | |
| 55 to 59 g/km | 18% | |
| 60 to 64 g/km | 19% | |
| 65 to 69 g/km | 20% | |
| 70 to 74 g/km | 21% | |
| 75 to 79 g/km | 21% | |
| 80 to 84 g/km | 22% | |
| 85 to 89 g/km | 23% | |
| 90 to 94 g/km | 24% | |
| 95 to 99 g/km | 25% | |
| 100 to 104 g/km | 26% | |
| 105 to 109 g/km | 27% | |
| 110 to 114 g/km | 28% | |
| 115 to 119 g/km | 29% | |
| 120 to 124 g/km | 30% | |
| 125 to 129 g/km | 31% | |
| 130 to 134 g/km | 32% | |
| 135 to 139 g/km | 33% | |
| 140 to 144 g/km | 34% | |
| 145 to 149 g/km | 35% | |
| 150 to 154 g/km | 36% | |
| 155 g/km and above | 37% |
Diesel cars that do not meet the RDE2 emissions standard carry a 4% supplement, capped at the 37% maximum; almost all diesels registered since 2019 meet RDE2 and use the table as printed. The bands from 51 to 74 g/km rose by one point in April 2026; the bands from 75 g/km upwards have been fixed since April 2025 and stay in place to 2027/28. The electric car rate rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30, and the plug-in hybrid bands rise by one point a year alongside it.
The P11D value
The P11D value is the car’s list price when new including VAT, delivery and any factory-fitted options, but excluding the first registration fee and the first year’s vehicle tax. It is the manufacturer’s list price rather than what the employer paid, so a discounted or leased car is still taxed on the full figure, and it does not fall as the car ages. A capital contribution by the employee towards the car reduces the P11D value by up to £5,000, and payments made for private use reduce the benefit pound for pound. The company car tax calculator applies the percentage and your tax rate to any P11D value.
What typical cars cost
| Car | P11D value | CO2 and range | Percentage | Taxable benefit | Tax at 20%, a month | Tax at 40%, a month |
|---|---|---|---|---|---|---|
| Electric saloon | £45,000 | 0 g/km | 4% | £1,800 | £30 | £60 |
| Plug-in hybrid SUV | £42,000 | 40 g/km, 45-mile range | 10% | £4,200 | £70 | £140 |
| Petrol hatchback | £30,000 | 120 g/km | 30% | £9,000 | £150 | £300 |
| Petrol estate | £30,000 | 140 g/km | 34% | £10,200 | £170 | £340 |
| Older diesel, not RDE2 | £40,000 | 130 g/km, plus 4% | 36% | £14,400 | £240 | £480 |
| Large petrol SUV | £60,000 | 180 g/km | 37% | £22,200 | £370 | £740 |
The gap is the whole story of the company car market since 2020. The electric saloon costs its driver £720 a year at the higher rate while a petrol hatchback worth two thirds as much costs £3,600, and the employer’s Class 1A National Insurance follows the same pattern: £270 a year on the electric car against £1,350 on the petrol one. The electric versus petrol calculator sets the tax difference alongside fuel and charging costs.
Fuel benefit
An employer that pays for private fuel in a company car creates a second benefit: the fuel benefit multiplier of £29,200 for 2026/27 multiplied by the same appropriate percentage. For the petrol hatchback at 30% that is £8,760 of extra taxable income, £1,752 a year in tax at the basic rate or £3,504 at the higher rate, which only pays off for drivers with very high private mileage. Electricity is not fuel for this purpose, so charging an electric company car at work or on an employer’s account carries no fuel benefit. Employees who repay all private fuel at the advisory fuel rates avoid the charge.
Salary sacrifice for an electric car
Because the benefit in kind on an electric car is so low, giving up salary in exchange for one usually saves money: the sacrificed salary escapes income tax and National Insurance, and only the 4% benefit is taxed. The arrangement is protected for cars with emissions of 75 g/km or below; for higher-emission cars the tax is charged on the salary given up if that is higher. A higher rate taxpayer sacrificing £500 a month for a £45,000 electric car pays about £60 a month of benefit in kind and saves £210 of tax and National Insurance on the salary, so the car’s net cost is roughly £350 a month. The electric car salary sacrifice calculator works the figure for your salary, the monthly amount and the car’s P11D value, and our salary sacrifice guide covers the effect on pension and other benefits.
Vans
A company van available for private use is taxed on a flat benefit of £4,170 for 2026/27, plus £798 if the employer also pays for private fuel, whatever the van’s value. Zero-emission vans have no benefit charge. Vans used only for work with insignificant private use, such as taking the van home overnight, are exempt. The van tax calculator shows the tax at each rate.
Common questions
How is company car tax calculated? P11D value multiplied by the appropriate percentage for the car’s CO2 emissions, then taxed at your marginal income tax rate. A £30,000 car at 30% creates £9,000 of taxable benefit and £1,800 or £3,600 of tax.
What is the BIK rate for electric cars in 2026/27? 4% of the P11D value, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.
Do hybrids get a low rate? Plug-in hybrids emitting 1 to 50 g/km are rated by electric range, from 4% with 130 miles or more to 16% under 30 miles. Hybrids above 50 g/km use the ordinary CO2 bands.
What is the diesel supplement? An extra 4% for diesel cars that do not meet the RDE2 standard, capped at 37% in total. Most diesels registered since 2019 meet RDE2 and pay no supplement.
Does the tax fall as the car gets older? No. The P11D value is the original list price and stays fixed for as long as you have the car, which is why an older high-emission car can cost more in tax than it is worth.
Is a company car worth having? For an electric car, usually yes. For a petrol or diesel car the tax often exceeds the cost of running an equivalent private car with a cash allowance, so compare the two before accepting.
Information, not tax advice. Percentages and multipliers are the published 2026/27 figures on gov.uk: company car benefit, the appropriate percentage and gov.uk: expenses and benefits, company cars; worked figures are from the site’s calculator. Check your own P11D before acting on them.