Answers · UK 2025/26
How does company car Benefit in Kind (BIK) work in 2026/27 in the UK?
Company car BIK is calculated as: List Price x CO2 percentage = taxable benefit. You then pay income tax on that amount. The CO2 percentage depends on the car's emissions -- from 2% for pure electric (rising to 4% in 2026/27) up to 37% for high-emission vehicles.
Full answer
If your employer provides you with a company car for private use, you are taxed on the 'benefit in kind' (BIK) -- the notional value of having private access to the vehicle. How the calculation works: 1. Find the car's P11D value (manufacturer's list price including factory options and delivery, but excluding first registration fee and road tax). 2. Find the car's CO2 emissions-based percentage from the HMRC BIK table. In 2026/27, key rates include: - Pure electric (0g/km CO2): 4% - 1-50g/km with 130+ mile electric range: 4% - 1-50g/km with under 30 mile electric range: 14% - 51-75g/km: 17% - 76-90g/km: 19% - 91-100g/km: 22% - Cars above 160g/km: 35-37% 3. Multiply P11D value by the percentage to get the taxable benefit. 4. Multiply the taxable benefit by your marginal income tax rate (20%, 40%, or 45%) to get your annual tax cost. Example: A car with P11D value of £35,000 and 110g/km CO2 (25% BIK rate) gives a taxable benefit of £8,750. A basic rate taxpayer pays £1,750/year tax (£145.83/month). A higher rate taxpayer pays £3,500/year. Other points: - Diesel cars (non-RDE2 compliant) attract a 4% surcharge on the CO2 percentage, capped at 37%. - If the car is unavailable for part of the year, the benefit is pro-rated. - Capital contributions by the employee (up to £5,000) can reduce the P11D value. - The employer pays Class 1A NI (15% from April 2025) on the same taxable benefit amount. - Electric vehicles are particularly tax-efficient at 4% BIK in 2026/27, though rates rise annually.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.