Company Car Tax UK 2026/27: BIK Rates, EV Advantage, Calculation

UK company car tax (the "Benefit in Kind" or BIK charge) is the single biggest item on most P11Ds. The tax has been re-engineered over the last decade to push drivers towards electric vehicles - the 2026/27 EV BIK rate is just 3%, while a high-emission petrol or diesel can hit 37%. The arithmetic that follows is enough to flip the household-finance maths on whether to take the company car or take a cash allowance.

This guide explains the 2026/27 rates, the calculation, and the EV advantage in plain numbers.

The 2026/27 rates table

Company car BIK percentage depends on CO2 emissions (WLTP figure) and, for PHEVs, the zero-emission electric range. Diesel cars not meeting RDE2 emission standards add a 4% surcharge (capped at 37%).

Pure EVs (0 g/km CO2)

Tax year	BIK %
2025/26	3%
2026/27	3%
2027/28	4%
2028/29	5%
2029/30	7%

Confirmed in the 2024 Budget through to 2029/30. After 2029/30, rates are reviewed.

Plug-in Hybrids (1-50 g/km, varies by electric-only range)

For 2026/27:

Electric-only range	BIK %
130+ miles	6%
70-129 miles	9%
40-69 miles	13%
30-39 miles	14%
Under 30 miles	16%

(PHEV range bands also rise across 2027/28 and 2028/29 by 1% per year.)

Petrol and diesel (above 50 g/km)

For 2026/27, BIK percentage scales from 14% (51-54 g/km) up to 37% (170+ g/km), in 1% steps. The full scale at common bandings:

CO2 (g/km)	Petrol BIK %	Diesel BIK % (with RDE2 surcharge)
51-54	14%	18%
55-59	15%	19%
60-64	16%	20%
65-69	17%	21%
70-74	18%	22%
75-79	19%	23%
80-84	20%	24%
85-89	21%	25%
90-94	22%	26%
95-99	23%	27%
100-104	24%	28%
105-109	25%	29%
110-114	26%	30%
115-119	27%	31%
120-124	28%	32%
125-129	29%	33%
130-134	30%	34%
135-139	31%	35%
140-144	32%	36%
145-149	33%	37% (cap)
150-154	34%	37%
155-159	35%	37%
160-164	36%	37%
165-169	37%	37%
170+	37%	37%

Diesel cars meeting the RDE2 standard are taxed at the same rates as petrol (no 4% surcharge). Most cars sold new since January 2021 meet RDE2.

The calculation

Taxable benefit = P11D value × BIK %
Annual tax cost = Taxable benefit × Marginal tax rate

The P11D value is the manufacturer's list price including VAT, options and delivery - not the price your employer paid (which is often discounted). Road tax and first registration fee are excluded from the P11D value.

Worked examples - 2026/27

Example 1 - high-spec EV

Tesla Model Y Long Range. P11D value: £52,990. BIK: 3%.

Taxable benefit:        £52,990 × 3%  = £1,589.70
Higher-rate (40%) tax:  £1,589.70 × 40% = £635.88/year
                                       = ~£53/month

Effectively this is a £52,990 car for £53/month of personal tax. EVs are unprecedentedly tax-efficient as company cars right now.

Example 2 - popular hybrid

Ford Kuga PHEV (50-mile electric range). P11D value: £42,000. BIK: 13%.

Taxable benefit:        £42,000 × 13% = £5,460
Higher-rate tax:        £5,460 × 40%  = £2,184/year
                                      = £182/month

Example 3 - popular petrol SUV

Volvo XC60 petrol mild-hybrid (146 g/km). P11D value: £55,000. BIK: 33%.

Taxable benefit:        £55,000 × 33% = £18,150
Higher-rate tax:        £18,150 × 40% = £7,260/year
                                      = £605/month

The same £55,000 of vehicle costs you 11× more in tax (compared to the Tesla above) because of CO2 emissions.

Example 4 - premium petrol GT

Audi RS6 (245 g/km). P11D value: £104,000. BIK: 37%.

Taxable benefit:        £104,000 × 37% = £38,480
Higher-rate tax:        £38,480 × 40%  = £15,392/year
                                       = £1,283/month

For most drivers, this is uneconomical as a company car - better to take cash allowance and buy/lease privately.

The fuel benefit charge - usually a trap

If your employer pays for private fuel in a non-EV company car, you incur a separate fuel benefit charge. It's a flat amount (multiplier × BIK%):

For 2026/27, the multiplier is £27,800. The fuel benefit:

Fuel benefit = £27,800 × your BIK %
Tax on fuel benefit = above × your marginal rate

Worked example - Volvo XC60 driver above with employer-paid fuel:

Fuel benefit:           £27,800 × 33% = £9,174
Higher-rate tax:        £9,174 × 40%  = £3,670/year
                                      = £306/month

For most drivers, the cost of paying back the employer for private mileage (at HMRC's Advisory Fuel Rates - 14p/mile petrol, 12p diesel for typical engine sizes in 2026) is far less than £3,670 a year. If your private mileage is under ~25,000 miles a year, refusing the fuel benefit and paying back is almost always cheaper.

EVs are exempt from the fuel benefit charge (electricity is not classed as a "road fuel" for these purposes - at the time of writing).

Cash allowance vs company car - the trade-off

Many employers offer either a company car or a "car allowance" (extra cash, typically £400-£800/month). Compare:

• Company car: tax on BIK at your marginal rate, no flexibility on model/age, employer covers maintenance and (usually) insurance.
• Cash allowance: taxed as ordinary income at your marginal rate + NIC, you choose the car (new or used), you cover all running costs, you may claim Mileage Allowance Relief if you drive for work (see our mileage rebate guide).

For an EV at the 3% BIK rate, the company-car route is almost always better. For a high-emission petrol or diesel, the cash route usually wins - particularly because the cash gives you the flexibility to buy a much-cheaper used car.

If your employer offers both options, ask payroll for a detailed comparison covering BIK tax, fuel benefit, the cash equivalent, and any company-car running-cost coverage.

What to check on your P11D

The P11D-listed company car figure should equal:

P11D value × BIK %

If the figure is bigger than expected:

• Confirm the P11D value (you may have remembered the price your employer paid, not the RRP including options).
• Confirm the BIK percentage (CO2 + RDE2 status + diesel surcharge interaction).
• Confirm the period (a car for 9 months should show 9/12 of the full-year figure, not the full year).
• Confirm the fuel benefit charge wasn't accidentally included if you opted out.

Disclaimer

PayslipIQ provides automated educational guidance based on the figures you supply. It is not regulated tax advice. Company car tax interacts with VAT, capital allowances, salary sacrifice rules and your employer's commercial arrangements in ways outside the scope of this guide. For complex cases (very high-value vehicles, classic cars, ultra-low-emission grants, transfer of ownership during the year), consult a CTA-qualified tax adviser.