How do company car tax (BIK) percentage bands work for different CO2 and electric range?

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Company car tax (Benefit in Kind, or BIK) is one of the more complex parts of UK payroll tax, because the percentage applied to the car list price depends on emissions data that varies enormously between vehicle types. **How BIK tax is calculated** The taxable benefit is the car list price (P11D value, including most factory options but before any discount) multiplied by a BIK percentage set according to CO2 emissions (and electric range for hybrids), and this taxable benefit amount is then taxed at your marginal Income Tax rate (20%, 40% or 45%), with the employer also paying Class 1A National Insurance on the same benefit value. **Pure electric cars** Fully electric cars with zero tailpipe emissions sit in the lowest BIK band, taxed at a low single-digit percentage that has been rising gradually each year from its very low starting point, but remains dramatically cheaper than an equivalent petrol or diesel car -- this is the single biggest reason electric company cars have become so popular through salary sacrifice car schemes. **Plug-in hybrids -- the electric range matters** For plug-in hybrid vehicles (which have both a CO2 figure and an electric-only range), the BIK percentage depends on BOTH figures: a plug-in hybrid with a long electric-only range (for example 130 miles or more) sits in a much lower band than one with the same CO2 figure but only a short electric range (for example under 30 miles), because HMRC treats a genuinely long-range hybrid as much closer to a pure EV in typical usage. **Petrol and diesel cars** Conventional petrol and diesel cars are taxed on a sliding scale that rises roughly in line with CO2 emissions in bands, reaching a maximum percentage for the highest-emitting vehicles -- diesel cars that do not meet the RDE2 emissions standard also carry an additional supplement on top of the standard percentage for their CO2 band. **Worked example** A fully electric car with a £45,000 list price and a low BIK percentage might generate a taxable benefit of only a few thousand pounds a year, costing a higher-rate taxpayer perhaps £1,000-£1,500 a year in company car tax. An equivalent petrol SUV with the same £45,000 list price but higher CO2 emissions, taxed at a percentage several times higher, could generate a taxable benefit several times larger, costing the same higher-rate taxpayer several thousand pounds more a year for a broadly similar car. **Why employers push salary sacrifice EV schemes** Because electric cars combine a low BIK percentage with the ability to acquire the car through salary sacrifice (reducing gross salary, and therefore Income Tax and National Insurance, in exchange for the car), many employees can now access a company electric car far more cheaply overall than buying a similar car privately, even after accounting for the BIK tax charge itself. **Practical tip** Always check the specific BIK percentage for the exact CO2 figure (and electric range, if a hybrid) of the car you are considering using HMRC company car tax tables, since even small differences in official CO2 figures between similar trim levels of the same model can push a car into a noticeably different, more expensive band.

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