Company car tax 2026 is one of the biggest variables in a company car driver’s take-home pay. Officially called Benefit in Kind (BIK) tax, it applies to any employee who has access to a company-provided vehicle for private use — including commuting. With HMRC confirming updated BIK bands, a higher fuel benefit multiplier, and the employer NIC rate now at 15%, the 2026/27 tax year brings meaningful changes for both employees and fleet managers.
This guide sets out the full BIK rates table for 2026/27, walks through exactly how your company car tax is calculated, and covers employer costs so you can make informed decisions about your remuneration package.
How P11D Value Is Determined
Every company car tax calculation starts with the P11D value. This is the car’s list price — including VAT, delivery charges, and any factory-fitted or dealer-fitted options — but excluding the first-year registration fee and vehicle excise duty (road tax).
Key points on P11D value:
- List price matters, not what was paid. Even if your employer negotiated a fleet discount, HMRC uses the manufacturer’s published UK list price.
- Options add up. Metallic paint, upgraded alloy wheels, a tow bar, parking sensors — every optional extra increases the P11D value.
- Capital contributions reduce it. If you made a one-off capital contribution towards the cost of the car (up to a maximum of £5,000), the P11D value is reduced by that amount.
- Accessories fitted later are added. Any accessory costing £100 or more that is fitted after delivery increases the P11D value.
Example: A BMW 330e with a list price of £43,500, plus £1,200 of optional extras, has a P11D value of £44,700.
Complete BIK Rates Table for 2026/27
The BIK percentage determines how much of the P11D value is treated as a taxable benefit. Rates are set by HMRC on a sliding scale linked to CO2 emissions and — for plug-in hybrids emitting 1–50 g/km — the car’s zero-emission range.
For 2026/27, rates for zero-emission and ultra-low-emission vehicles (below 75 g/km) increase by 1 percentage point compared to 2025/26. Bands at 75 g/km and above are frozen at 2025/26 levels until April 2028.
Zero-Emission and Ultra-Low-Emission Vehicles
| CO2 (g/km) | Electric Range (miles) | 2025/26 BIK % | 2026/27 BIK % |
|---|---|---|---|
| 0 (pure electric) | N/A | 3% | 4% |
| 1–50 | 130+ | 3% | 4% |
| 1–50 | 70–129 | 6% | 7% |
| 1–50 | 40–69 | 9% | 10% |
| 1–50 | 30–39 | 13% | 14% |
| 1–50 | Less than 30 | 15% | 16% |
Vehicles Emitting 51 g/km and Above
| CO2 (g/km) | 2025/26 BIK % | 2026/27 BIK % |
|---|---|---|
| 51–54 | 16% | 17% |
| 55–59 | 17% | 18% |
| 60–64 | 18% | 19% |
| 65–69 | 19% | 20% |
| 70–74 | 20% | 21% |
| 75–79 | 21% | 21% (frozen) |
| 80–84 | 22% | 22% (frozen) |
| 85–89 | 23% | 23% (frozen) |
| 90–94 | 24% | 24% (frozen) |
| 95–99 | 25% | 25% (frozen) |
| 100–104 | 26% | 26% (frozen) |
| 105–109 | 27% | 27% (frozen) |
| 110–114 | 28% | 28% (frozen) |
| 115–119 | 29% | 29% (frozen) |
| 120–124 | 30% | 30% (frozen) |
| 125–129 | 31% | 31% (frozen) |
| 130–134 | 32% | 32% (frozen) |
| 135–139 | 33% | 33% (frozen) |
| 140–144 | 34% | 34% (frozen) |
| 145–149 | 35% | 35% (frozen) |
| 150–154 | 36% | 36% (frozen) |
| 155+ | 37% | 37% (capped) |
Diesel supplement: Diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard attract a 4% supplement, subject to the 37% maximum. Most new diesels registered from September 2017 onwards meet RDE2, so check your car’s certificate of conformity.
How Employee Company Car Tax Is Calculated
Once you know the P11D value and the BIK percentage, calculating your annual company car tax is straightforward:
BIK taxable value = P11D value x BIK percentage Annual tax = BIK taxable value x your marginal income tax rate
Worked Example: Petrol Car
A petrol company car with a P11D value of £35,000 and CO2 emissions of 125 g/km:
- BIK percentage for 2026/27 at 125–129 g/km: 31%
- BIK taxable value: £35,000 x 31% = £10,850
- Tax at basic rate (20%): £10,850 x 20% = £2,170 per year (£181/month)
- Tax at higher rate (40%): £10,850 x 40% = £4,340 per year (£362/month)
Worked Example: Electric Car
A pure electric company car with a P11D value of £42,000:
- BIK percentage for 2026/27 at 0 g/km: 4%
- BIK taxable value: £42,000 x 4% = £1,680
- Tax at basic rate (20%): £1,680 x 20% = £336 per year (£28/month)
- Tax at higher rate (40%): £1,680 x 40% = £672 per year (£56/month)
Even at a higher P11D value, the electric car costs £1,834 less per year in BIK tax for a basic-rate taxpayer. On a like-for-like £42,000 P11D, the saving rises to £2,268 per year. For a detailed breakdown, see our guide to electric company car tax UK.
Employer Costs: Class 1A National Insurance at 15%
Employers pay Class 1A National Insurance Contributions on the BIK value of every company car provided to an employee. From April 2025, the Class 1A NIC rate is 15% (up from the previous 13.8%).
Employer NIC = BIK taxable value x 15%
Using the examples above:
| Vehicle | BIK Value | Employer Class 1A NIC |
|---|---|---|
| Petrol (125 g/km, £35k P11D) | £10,850 | £1,627.50/year |
| Electric (0 g/km, £42k P11D) | £1,680 | £252/year |
The NIC saving of £1,375.50 per car, per year, gives employers a strong financial incentive to transition fleets to electric vehicles. This cost is reported and paid via the P11D(b) form, due by 19 July (or 22 July for electronic payment) following the end of the tax year.
For full details on P11D reporting obligations, see our guide to P11D company car reporting 2026.
Fuel Benefit Charge 2026/27
If your employer pays for private fuel in your company car, there is an additional Benefit in Kind: the fuel benefit charge. For 2026/27, the HMRC fuel benefit multiplier is £29,200 (up from £28,200 in 2025/26).
Fuel benefit tax = £29,200 x BIK percentage x income tax rate
Example
A petrol car in the 31% BIK band, higher-rate taxpayer (40%):
- Fuel benefit taxable value: £29,200 x 31% = £9,052
- Tax: £9,052 x 40% = £3,621 per year (£302/month)
To break even on free private fuel at this tax cost, you would need to use roughly £3,621 of fuel on private journeys. At approximately 15p per mile in fuel costs, that equates to around 24,140 private miles per year — far more than most drivers cover.
In most cases, opting out of employer-provided private fuel is the better financial decision. You can avoid the charge entirely by reimbursing your employer for all private fuel before 6 July following the end of the tax year. For a deeper analysis, see our guide to the fuel benefit charge for company cars 2026.
Comparison with 2025/26 Rates
The headline changes for 2026/27 compared to 2025/26 are:
- Electric vehicles: BIK rises from 3% to 4% (still dramatically lower than petrol/diesel)
- PHEVs and sub-75 g/km cars: Each band increases by 1 percentage point
- 75 g/km and above: All bands are frozen — no change until April 2028
- Diesel supplement: Remains at 4% for non-RDE2 vehicles, capped at 37%
- Fuel benefit multiplier: Increases from £28,200 to £29,200
- Employer NIC: Remains at 15% (the increase from 13.8% took effect in April 2025)
For an employee driving a £42,000 electric car, the annual tax bill rises from £252 (at 3% BIK, basic rate) to £336 (at 4% BIK) — an increase of just £84 per year. Electric vehicles remain by far the most tax-efficient company car option.
How to Reduce Your Company Car Tax
Choose a lower-emission vehicle. Each CO2 band you drop reduces your BIK percentage. Moving from 130 g/km to 105 g/km cuts your BIK from 32% to 27% — a five-percentage-point reduction that translates to meaningful annual savings.
Choose an electric vehicle. At 4% BIK, the tax saving compared to a typical petrol car (28–32% BIK) can be well over £2,000 per year. The gap is even larger for higher-rate taxpayers.
Consider salary sacrifice. Electric cars taken through a salary sacrifice arrangement reduce your gross salary, saving both income tax and employee NIC. Combined with the low BIK rate, this is one of the most tax-efficient ways to drive a new car. Read more in our guide to salary sacrifice electric car vs buying UK.
Decline private fuel. Unless you drive exceptionally high private mileage, opting out of free fuel avoids a substantial additional tax charge.
Keep accurate mileage records. If your employer reimburses business fuel at the HMRC Advisory Fuel Rate, you need a reliable mileage log to support your claims. Tripbook automatically tracks every journey and categorises trips as business or personal, giving you an HMRC-ready record without manual effort.
Mandatory Payrolling from April 2027
From 6 April 2027, employers will be required to payroll most benefits in kind — including company cars — through PAYE in real time. Originally planned for April 2026, HMRC delayed the start date to give employers more time to prepare. This replaces the previous system where BIK was reported annually on a P11D form and collected through a tax code adjustment.
For employees, this means your company car tax will be deducted directly from your monthly pay, making the cost more visible and predictable. For employers, it simplifies year-end reporting but requires accurate benefit values to be entered into payroll software. Loans and living accommodation benefits are excluded from mandatory payrolling for the time being.
Track Your Business Mileage With Tripbook
Whether you drive a company car or claim mileage in your own vehicle, accurate records are essential. Tripbook logs every journey automatically using GPS, categorises trips with a single swipe, and generates reports that satisfy HMRC requirements.
Download Tripbook from the App Store and keep your mileage records organised throughout the tax year.
