Answers · UK 2025/26

How much tax do I pay on a company car?

Company car tax is based on the car's list price multiplied by a Benefit-in-Kind (BIK) percentage set by its CO2 emissions, then taxed at your Income Tax rate. Electric cars are taxed at just 4% for 2026/27, while high-emission petrol cars can reach 37%.

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 most options and delivery) multiplied by a BIK percentage determined by its CO2 emissions and fuel type. You then pay Income Tax on that value at your marginal rate (20%, 40% or 45%), and your employer pays Class 1A National Insurance on it. For 2026/27, fully electric cars carry a very low BIK rate of 4%, making salary-sacrifice EV schemes extremely tax-efficient. Petrol and diesel cars scale up with emissions, with the highest-emitting cars hitting the 37% cap; diesels not meeting RDE2 standards add a 4% surcharge (capped at 37%). Worked example: a higher-rate (40%) taxpayer with an electric car costing £40,000 has a BIK value of £40,000 × 4% = £1,600, so the annual tax is £1,600 × 40% = £640. Compare a £40,000 petrol car at, say, a 30% BIK rate: £12,000 taxable value × 40% = £4,800 a year — far more. If your employer also provides free fuel for private mileage in a petrol or diesel car, a separate car fuel benefit applies, based on a fixed multiplier and the same BIK percentage, which is often not worthwhile for low-mileage drivers. These rules apply UK-wide, though the Income Tax rate applied follows Scottish bands for Scottish taxpayers. Use the Take-Home Pay calculator to factor a company car into your net pay.