Company Car Tax Rates 2026-27: BiK Rates, EV Incentives and How to Calculate

What is company car Benefit in Kind?

When an employer makes a car available for private use, HMRC treats that benefit as taxable income. Private use includes commuting. The P11D value is the car’s list price including extras and VAT, but excluding the first year registration fee and vehicle tax. It is the figure your employer reports to HMRC, and it can differ from the price your employer actually paid.

You pay income tax on the taxable benefit, usually through a change to your tax code. Your employer pays Class 1A National Insurance on the same amount, at 15% for 2026/27, but that cost does not come out of your pay. The calculator shows your income tax cost only and does not include the fuel benefit charge.

The basic calculation

The formula is the P11D value multiplied by the BiK percentage, multiplied by your income tax rate. The first two numbers give the taxable benefit, and your tax rate turns that into an annual tax bill. Divide by twelve for the monthly cost.

A £35,000 electric car at 4% creates a £1,400 taxable benefit. A basic rate taxpayer pays £280 a year, about £23.33 a month, and a higher rate taxpayer pays £560 a year, about £46.67 a month. A £35,000 petrol car emitting 120 g/km sits in the 30% band, which creates a £10,500 benefit. The same two taxpayers pay £2,100 and £4,200 a year, which is £175 and £350 a month.

Electric cars and the 4% rate

Fully electric cars have the lowest rate. It is 4% in 2026/27, and the published schedule raises it to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.

Even at 9% an electric car is taxed far more lightly than a petrol or diesel car of similar price. A lower benefit does not make the car free, so compare the whole cost, including charging, insurance and any amount your employer asks you to contribute.

Plug in hybrids and emissions bands

Cars emitting 1 to 50 g/km, which in practice means plug in hybrids, are rated by their zero emission electric range. With a range of 130 miles or more the rate is 4%. From 70 to 129 miles it is 7%, from 40 to 69 miles 10%, from 30 to 39 miles 14%, and under 30 miles 16%.

Above 50 g/km the rate depends on emissions alone. It starts at 17% for 51 to 54 g/km and reaches 21% for 70 to 79 g/km. From 80 g/km the rate is 22%, and it then rises by one percentage point for every extra 5 g/km. A car at 100 to 104 g/km is rated 26%, and a car at 145 to 149 g/km is rated 35%. The rate is capped at 37%, which applies from 155 g/km. Use the exact CO₂ figure from the car’s documents, because a small difference can move the car into the next band.

Diesel cars

A diesel car that does not meet the Real Driving Emissions 2 (RDE2) standard carries a 4% surcharge on top of its normal rate, still capped at 37%. Check with the manufacturer or your fleet provider whether your diesel meets the standard. The calculator has a switch for this.

Using the calculator and what to check

Enter the P11D value, choose the fuel type and CO₂ figure, add the electric range for a plug in hybrid, and select your income tax band. The result shows the taxable benefit, the annual tax and the monthly cost, with an electric car equivalent for comparison.

Your own tax band can change if the benefit pushes your income over a threshold. The result does not include the fuel benefit charge, a car that is available for only part of the year, or any contribution you make towards the car. For a binding answer use HMRC’s guidance or ask your payroll team. ClearPounds is independent and does not provide financial or tax advice.