Answers · UK 2025/26
Is a company car a taxable benefit in kind?
Yes. A company car is a benefit in kind (BiK) subject to income tax. The taxable value is calculated as a percentage of the car list price based on its CO2 emissions.
Full answer
Company cars are taxed as a benefit in kind under HMRC rules. The taxable value (the P11D value) is the car original list price multiplied by the appropriate percentage, which ranges from 2% for zero-emission electric vehicles in 2026/27 up to 37% for high-emission vehicles. For example, a £30,000 petrol car with CO2 emissions of 120g/km has a BiK rate of around 30%, giving a taxable benefit of £9,000. A basic-rate taxpayer would pay 20% of £9,000 equalling £1,800 in income tax per year. Your employer also pays Class 1A NI at 13.8% on the taxable value. The BiK is reported on form P11D and usually collected via PAYE through your tax code. Electric cars remain significantly more tax-efficient with a 2% rate rising to 7% by 2029/30 under current legislation.
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.