Company car tax and BIK calculator (benefit in kind), 2026/27.

Company car tax (Benefit in Kind, or BIK) is calculated by multiplying the car's P11D value by its BIK percentage. The BIK percentage is determined by the car's CO2 emissions (and electric range for PHEVs). You then pay income tax at your marginal rate on the BIK amount, and your employer pays Class 1A National Insurance at 15% on the same BIK figure.

Electric vehicles have a BIK rate of 4% in 2026/27, rising to 5% in 2027/28. This makes EVs significantly more tax-efficient than petrol or diesel equivalents. For example, a £40,000 EV generates a taxable benefit of £1,600, costing a 20% taxpayer £320 a year in company car tax.

The P11D value is the list price of the car including options and VAT, but excluding the first registration fee and road tax. It does not reduce each year — it remains the original list price for the life of the benefit, even if the car depreciates. This is different from the taxable value, which changes as the BIK percentage changes year-on-year.

A cash car allowance is paid as salary (subject to income tax and NI) but lets you choose your own car and claim business mileage. A company car provides more certainty but the BIK charge reduces its value. For high-emission cars, the charge can be substantial. Zero-emission cars use a 4% BIK percentage in 2026/27. A full comparison depends on your tax rate, mileage and car preference.

Employers report all benefits in kind on form P11D by 6 July each year, and pay Class 1A NI by 19 July (or 22nd if paying electronically). The Class 1A NI rate is 15% on the BIK value for 2026/27. This cost falls entirely on the employer — employees do not pay NI on BIK, only income tax.

If your employer pays for fuel you use privately in a company car, a separate car fuel benefit charge applies on top of the car benefit. It is the car's BIK percentage applied to HMRC's fuel benefit multiplier — £29,200 for 2026/27, up from £28,200 — however little private fuel you use. A petrol car at 28% gives a fuel benefit of £8,176, costing a higher-rate taxpayer £3,270 a year on top of the car benefit. Electricity is not treated as fuel, so fully electric cars never incur it. Tick the free-fuel option in the calculator to include it; repaying the full cost of private fuel by 6 July after the tax year removes the charge.

BIK percentages are set for each tax year, running 6 April to 5 April, and the government publishes them several years ahead so employers can plan fleet choices. A car you already have is taxed at the new percentage for its CO2 band from each 6 April — there is no protection for the rate that applied when the car was first provided.