Calculate your benefit-in-kind tax on a company car for 2026-27
If your employer provides you with a company car that you can use for personal journeys, HMRC treats this as a taxable benefit in kind (BIK). The amount of tax you pay depends on the car's list price (known as the P11D value), its CO2 emissions, the fuel type, and your personal income tax rate. For the 2026-27 tax year, BIK rates range from just 2% for zero-emission electric vehicles up to 37% for the highest-polluting cars. Company car BIK is one of the most significant employment tax considerations for UK employees. A high-emission petrol or diesel company car can add thousands of pounds to your annual tax bill, while an electric vehicle can cost as little as GBP 100 to GBP 200 per year in BIK tax. This dramatic difference has driven a surge in electric company car orders, with EVs now accounting for a significant share of fleet registrations. The BIK system works by assigning a percentage to each CO2 emissions band. This percentage is applied to the car's P11D value (the list price including options, delivery, and VAT, but excluding the first year registration fee and vehicle excise duty). The resulting figure is your benefit-in-kind value, which is added to your taxable income. You then pay income tax on this amount at your marginal rate -- 20% for basic-rate taxpayers, 40% for higher-rate, or 45% for additional-rate taxpayers. Diesel vehicles that do not meet the Real Driving Emissions Step 2 (RDE2) standard face a 4% supplement on top of their CO2-based percentage, capped at the maximum 37%. This means diesel drivers can pay significantly more BIK tax than petrol drivers of a similar car, making diesel company cars increasingly unattractive from a tax perspective.
To calculate your company car BIK tax: 1. Enter the P11D value. This is the car's list price including optional extras, delivery charges, and VAT, but excluding the first-year registration fee and road tax. You can find this on your P11D form from your employer, on the manufacturer's website, or by asking your fleet manager. 2. Enter the CO2 emissions in grams per kilometre. This is the official WLTP combined CO2 figure, found on the V5C registration document, the manufacturer's specification sheet, or the DVLA vehicle enquiry service. 3. Select the fuel type. Choose between petrol, diesel (non-RDE2), hybrid/PHEV, or electric (BEV). Diesel vehicles that do not meet RDE2 standards incur a 4% surcharge. If your diesel is RDE2-compliant, select petrol as the rates are the same. 4. Select your income tax rate. Basic rate is 20% (income GBP 12,571 to GBP 50,270), higher rate is 40% (GBP 50,271 to GBP 125,140), and additional rate is 45% (over GBP 125,140). 5. Enter any employee contribution you make towards private use of the vehicle. If you pay your employer an annual amount for personal use of the car, this is deducted from the BIK value before tax is calculated. 6. Review the results showing your BIK percentage, BIK value, annual tax cost, and monthly tax cost. The CO2 band and tax rate are also displayed for reference. 7. Use the chart to compare what your BIK tax would be at different tax rates, which is useful if you expect your income to change.
Company car BIK tax is calculated in several steps using HMRC's published tables for the 2026-27 tax year. **Step 1: Determine the BIK percentage from CO2 emissions and fuel type.** HMRC publishes a table mapping CO2 emission bands to BIK percentages. For 2026-27, the key bands are: Zero emissions (electric): 2%. This is the headline rate that makes EVs so tax-efficient as company cars. 1-50 g/km: 2% for pure EVs, 5% for plug-in hybrids (PHEVs) with substantial electric range, 8% for other vehicles in this band. 51-75 g/km: 14%. 76-94 g/km: 19%. 95-99 g/km: 20%. 100-104 g/km: 21%. From 105 g/km, the percentage increases by 1% for every 5 g/km band: 105-109 is 22%, 110-114 is 23%, and so on up to 165-169 g/km at 34%. 170 g/km and above: 37% (the maximum). For diesel vehicles that do not meet the RDE2 emissions testing standard, a 4% supplement is added to the CO2-based percentage, subject to the 37% cap. **Step 2: Calculate the BIK value.** BIK value = P11D value x BIK percentage / 100 For example, a petrol car with a P11D value of GBP 30,000 and CO2 emissions of 120 g/km falls in the 120-124 band at 25%. BIK value = 30,000 x 25 / 100 = GBP 7,500. **Step 3: Deduct employee contributions.** If the employee makes a contribution towards private use: Taxable BIK = BIK value minus employee contribution. The contribution cannot reduce the taxable amount below zero. **Step 4: Calculate annual tax.** Annual tax = taxable BIK x income tax rate / 100 For our example at the 40% higher rate: GBP 7,500 x 40 / 100 = GBP 3,000 per year, or GBP 250 per month. **Comparison with electric:** The same GBP 30,000 as an EV would have a BIK of 2%, giving a BIK value of GBP 600 and annual tax of just GBP 240 at 40% -- a saving of GBP 2,760 per year. This illustrates why electric company cars are exceptionally tax-efficient in the current regime. Employers also pay Class 1A National Insurance (currently 13.8%) on the BIK value, so the employer's cost is also reduced with lower-emission vehicles.