Company car tax is income tax on a company car you can use privately. For 2026/27 the taxable benefit is the car's list price multiplied by an HMRC percentage: 4% for a fully electric car, 4% to 16% for plug-in hybrids and up to 37% for petrol and diesel. You pay tax on it at your usual rate.
The benefit is normally reported on your P11D, or taxed through payroll if your employer payrolls it, and HMRC usually collects the tax by lowering your tax code. Your employer also pays Class 1A National Insurance on it at 15% (HMRC).
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Company car tax rates for 2026/27
These are HMRC's appropriate percentages for 2026/27 for cars registered with a WLTP emissions figure (HMRC, 480 Appendix 2).
Electric and plug-in hybrid cars
| CO2 (g/km) | Electric range | 2026/27 percentage |
|---|---|---|
| 0 | not applicable | 4% |
| 1 to 50 | 130 miles or more | 4% |
| 1 to 50 | 70 to 129 miles | 7% |
| 1 to 50 | 40 to 69 miles | 10% |
| 1 to 50 | 30 to 39 miles | 14% |
| 1 to 50 | under 30 miles | 16% |
Petrol, hybrid and RDE2 diesel cars
| CO2 (g/km) | 2026/27 percentage | Non-RDE2 diesel (plus 4%, max 37%) |
|---|---|---|
| 51 to 54 | 17% | 21% |
| 55 to 59 | 18% | 22% |
| 60 to 64 | 19% | 23% |
| 65 to 69 | 20% | 24% |
| 70 to 74 | 21% | 25% |
| 75 to 79 | 21% | 25% |
| 80 to 84 | 22% | 26% |
| 85 to 89 | 23% | 27% |
| 90 to 94 | 24% | 28% |
| 95 to 99 | 25% | 29% |
| 100 to 104 | 26% | 30% |
| 105 to 109 | 27% | 31% |
| 110 to 114 | 28% | 32% |
| 115 to 119 | 29% | 33% |
| 120 to 124 | 30% | 34% |
| 125 to 129 | 31% | 35% |
| 130 to 134 | 32% | 36% |
| 135 to 139 | 33% | 37% |
| 140 to 144 | 34% | 37% |
| 145 to 149 | 35% | 37% |
| 150 to 154 | 36% | 37% |
| 155 and above | 37% | 37% |
The 70 to 74 and 75 to 79 bands are both 21% in 2026/27. That is because cars under 75g/km rose by 1 percentage point in 2026/27 while cars at 75g/km and above stayed at their 2025/26 rate, as announced at Autumn Statement 2022 (HMRC policy paper).
A diesel car that meets the Euro 6d (RDE2) standard uses the petrol column. Other diesel cars add a 4% supplement, capped at 37% (HMRC, 480 chapter 12).
Rates announced for later years
| Tax year | Zero-emission cars | Cars 1 to 50g/km | Maximum |
|---|---|---|---|
| 2027/28 | 5% | up by 1 point on 2026/27 | 37% |
| 2028/29 | 7% | 18% | 38% |
| 2029/30 | 9% | 19% | 39% |
Sources: HMRC policy papers for 2025/26 to 2027/28 and 2028/29 to 2029/30. An earlier version of this guide gave 18% and 19% as the electric-car rates for 2028/29 and 2029/30. Those are the plug-in hybrid rates; the electric-car rates are 7% and 9%.
How the calculation works
Taxable benefit = list price (plus options) × appropriate percentage
Your tax = taxable benefit × your income tax rate
The list price is the price published for the car on the day before its first registration, including VAT, delivery and options fitted before delivery. It is not the price your employer paid, which may include discounts (HMRC, 480 chapter 12). Second-hand cars use the list price from when they were new.
Worked examples for 2026/27
| Car | List price | CO2 and range | Percentage | Taxable benefit | Tax at 20% | Tax at 40% |
|---|---|---|---|---|---|---|
| Fully electric | £40,000 | 0 g/km | 4% | £1,600 | £320 | £640 |
| Plug-in hybrid | £45,000 | 1 to 50 g/km, 45-mile range | 10% | £4,500 | £900 | £1,800 |
| Petrol | £35,000 | 120 g/km | 30% | £10,500 | £2,100 | £4,200 |
| Non-RDE2 diesel | £35,000 | 120 g/km | 34% | £11,900 | £2,380 | £4,760 |
A higher-rate taxpayer with the £40,000 electric car pays £640 a year, about £53 a month. The same driver with the £35,000 petrol car pays £4,200 a year, £350 a month.
What it does to your tax code
HMRC takes the benefit off your Personal Allowance. With the £10,500 petrol car benefit, a 1257L code becomes 207L (£12,570 − £10,500 = £2,070). If your benefits exceed your allowance, you get a K code; see the K code guide.
Free fuel for private journeys
If your employer pays for fuel you use privately, there is a separate car fuel benefit. For 2026/27 it is £29,200 multiplied by the car's appropriate percentage (HMRC).
For the 120g/km petrol car above: £29,200 × 30% = £8,760 of benefit, which costs £3,504 a year at 40%.
The charge is the same however little private fuel you use, so it is often cheaper to pay your employer back for private fuel in full. HMRC's advisory fuel rates, which employers use for this, from 1 September 2026 are 14p a mile for a petrol car of 1,400cc or less, 17p for 1,401 to 2,000cc and 27p above that, and 15p, 16p and 22p for diesel bands (HMRC). At 17p a mile, £3,504 would pay for about 20,600 private miles.
Electricity is not a fuel for car fuel benefit purposes, so a fully electric car has no fuel benefit charge (HMRC). The advisory electricity rate from 1 September 2026 is 7p a mile for home charging and 15p for public charging.
Company car or cash allowance?
A cash allowance is taxed as ordinary pay, with employee National Insurance on top, and you then run your own car. For a low-emission car the company car is usually cheaper in tax. For a high-emission car the gap narrows, and a cash allowance lets you choose a cheaper car. If you use your own car for work, your employer can pay up to the approved mileage rate tax-free: for 2026/27, 55p a mile for the first 10,000 business miles and 25p after (HMRC).
Payrolling from April 2027
From April 2027 employers must tax company cars and car fuel through payroll instead of on a P11D (HMRC). The tax will then appear on your payslip each month rather than through a reduced tax code.
What to check on your P11D
- List price includes options, but not the employer's discount.
- CO2 figure and electric range match the car's documents.
- Diesel status: an RDE2 diesel should not carry the 4% supplement.
- Dates: a car available for 9 months should be charged for 9 months.
- Fuel benefit: should not appear if you paid back all private fuel.
To check the tax lines on your own payslip, see How do I check my payslip is correct?.
Frequently asked questions
What is the company car tax rate for an electric car in 2026/27?
4% of the car's list price. On a £40,000 electric car the taxable benefit is £1,600, which costs £320 a year at the 20% basic rate or £640 at 40%. The rate rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.
How is company car tax calculated?
Multiply the car's list price, including options, by HMRC's appropriate percentage for its CO2 emissions, and for a plug-in hybrid its electric range. Then multiply the result by your income tax rate. HMRC usually collects the tax by reducing your tax code.
What is the highest company car tax rate in 2026/27?
37%. It applies to petrol cars at 155g/km and above and to non-RDE2 diesel cars from 135g/km.
Is there a fuel benefit charge on an electric company car?
No. Electricity is not a fuel for car fuel benefit purposes. For petrol and diesel cars with free private fuel, the 2026/27 charge is £29,200 multiplied by the car's appropriate percentage.
Sources
All sources were opened and checked by PayslipIQ on 21 September 2026.
- HMRC (GOV.UK): Work out the appropriate percentage for company car benefits (480: Appendix 2). 2026/27 percentages. Verified 21 Sep 2026.
- HMRC (GOV.UK): How to work out the benefit of a company car (480: Chapter 12). List price and diesel supplement. Verified 21 Sep 2026.
- HMRC (GOV.UK): Company car rates 2025/26 to 2027/28 and 2028/29 to 2029/30. Verified 21 Sep 2026.
- HMRC (GOV.UK): Travel: mileage and fuel rates and allowances. Car fuel multiplier and approved mileage rates. Verified 21 Sep 2026.
- HMRC (GOV.UK): Rates and thresholds for employers 2026 to 2027. Advisory fuel rates from 1 September 2026 and Class 1A. Verified 21 Sep 2026.
- HMRC (GOV.UK): Changes to reporting of benefits in kind from April 2027. Verified 21 Sep 2026.
Disclaimer
PayslipIQ provides educational guidance based on published HMRC rules. It is not regulated tax advice. Company car tax also depends on capital contributions, periods when the car was unavailable, shared cars and salary sacrifice arrangements, which this guide does not cover.
How to work out UK company car tax for 2026/27
Calculate the taxable benefit of a company car for 2026/27 from its list price, CO2 emissions and HMRC appropriate percentage, then the tax at your rate.
About 15 minutes · Cost to you: £0
Find the list price
Use the car's list price on the day before it was first registered, including VAT, delivery and factory-fitted options. It is not the price your employer paid.
Find the CO2 figure and, for a plug-in hybrid, the electric range
These are on the car's registration document or the manufacturer's certificate of conformity.
Look up the appropriate percentage
For 2026/27 a zero-emission car is 4%, plug-in hybrids are 4% to 16% depending on electric range, and other cars run from 17% at 51 to 54g/km to 37% at 155g/km and above. Add 4% for a diesel that is not RDE2 compliant, up to 37%.
Multiply the list price by the percentage
Example: a £40,000 electric car at 4% gives a taxable benefit of £1,600.
Apply your tax rate
Multiply the benefit by your income tax rate. At 40%, £1,600 costs £640 a year. HMRC usually collects this by reducing your tax code.
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Check my payslip freePayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, payroll, accounting, pension, benefits or employment advice. Always verify your payslip, tax code, deductions and take-home pay with your employer's payroll department, HMRC, your pension provider, a qualified accountant, tax adviser or another appropriately qualified professional.