Answers · UK 2025/26

How much tax do I pay on a company car in 2026?

You pay tax on a company car’s Benefit-in-Kind (BIK) value, which is a percentage of its list price set by its CO2 emissions. For 2026/27 electric cars are taxed at just 4%, while petrol and diesel cars can reach 37%. You pay your Income Tax rate on that figure.

Last updated: 1 June 2026Last reviewed: 1 June 2026How we verify

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A company car available for private use is a taxable benefit in kind (BIK). The taxable value is the car’s P11D list price (including options) multiplied by a percentage band set by its CO2 emissions and, for plug-in hybrids, electric range. For 2026/27 the rates run from just 4% for fully electric cars up to a maximum of 37% for the most polluting petrol and diesel models; diesels without RDE2 compliance add a 4% surcharge. You then pay Income Tax at your marginal rate on the BIK value, and your employer pays Class 1A National Insurance at 15% on it. Worked example: a higher-rate taxpayer chooses an electric car with a £40,000 list price. The BIK value is 4% × £40,000 = £1,600. They pay 40% tax on that = £640 a year, around £53 a month — strikingly cheap. By contrast, a £40,000 petrol car emitting around 130g/km might sit at 31%, giving a BIK of £12,400 and a tax bill of £4,960 a year for a higher-rate taxpayer. This is why electric company cars, especially via salary sacrifice, are so popular. The BIK percentages are set UK-wide, so the value is the same in Scotland, but the tax you pay on it follows Scottish Income Tax rates (up to 45%). Use the Company Car Tax and Take-Home Pay calculators to compare vehicles.