What is a company car Benefit in Kind tax?

Full answer

A **company car Benefit in Kind (BIK)** arises when your employer provides you with a car for private use. HMRC calculates the taxable value, which is added to your income and taxed at your marginal rate. **BIK calculation formula:** > **Taxable BIK = P11D value x CO2 percentage** The **P11D value** is the list price of the car (including standard accessories, VAT, and delivery) — less any employee capital contribution (max £5,000 reduction). **2026/27 CO2 percentages (selected):** | Vehicle type | CO2 g/km | BIK % | |---|---|---| | Electric (0g) | 0 | **4%** | | Petrol hybrid | 1–50g | 5–14% | | Petrol | 51–75g | 15% | | Petrol | 100g | 22% | | Petrol | 130g | **30%** | | Petrol | 160g+ | **37%** | **Employee tax cost example:** A £40,000 petrol car (130g CO2): BIK = £40,000 x 30% = **£12,000 taxable value** - Basic rate (20%) taxpayer: **£2,400/year tax** (£200/month) - Higher rate (40%) taxpayer: **£4,800/year tax** (£400/month) **Employer Class 1A NI:** Employers pay **15% Class 1A NI** on the same BIK value. On the £12,000 above, that's **£1,800/year** for the employer. **Fuel benefit:** If the employer also provides free fuel for private use, there is an additional fuel benefit. The 2026/27 fuel benefit multiplier is **£27,800** — so a 30% CO2 car adds £27,800 x 30% = £8,340 taxable BIK for fuel alone. **Electric vehicle OpRA exemption:** Company EVs under salary sacrifice are exempt from the Optional Remuneration Arrangement (OpRA) rules — meaning employees can sacrifice salary for an EV and pay only 4% BIK, even under salary sacrifice.

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