Electric Company Car Tax (BIK) Rates 2026/27: Still the Cheapest Way to Get a Car?
Electric company cars remain the lowest Benefit-in-Kind tax band available, but rates are rising year by year as the government tapers away the incentive. Here's exactly what an EV company car costs you in tax in 2026/27, and how it compares to petrol/diesel.
Why Electric Cars Still Win on Company Car Tax
Company car tax (formally, Benefit-in-Kind or BIK tax) is calculated using a percentage of the car's list price (P11D value) that depends on its CO2 emissions — the lower the emissions, the lower the percentage, and therefore the lower the taxable benefit. Since 2020, the government set electric cars (0g/km CO2) at a dramatically lower BIK percentage than petrol or diesel equivalents to encourage adoption, and while that gap has been narrowing through a planned annual increase since the 2025/26 tax year, electric cars remain the cheapest fuel type for company car tax by a clear margin in 2026/27.
How the Calculation Works
The formula is straightforward once you know the inputs:
Taxable benefit = P11D value × BIK percentage
Tax you pay = Taxable benefit × your marginal Income Tax rate
| Step | Example (EV, P11D £40,000) |
|---|---|
| P11D value | £40,000 |
| BIK percentage (illustrative, check current HMRC table) | Low single digits |
| Taxable benefit | A few thousand pounds |
| Tax at 20% (basic rate) | A few hundred pounds/year |
| Tax at 40% (higher rate) | Roughly double the basic-rate figure |
Compare this with an equivalent petrol car, which sits on a much higher BIK percentage band — often 25–37% depending on emissions — meaning the taxable benefit, and therefore the tax paid, is many times higher for the same list price.
Electric vs Petrol/Diesel: The Practical Gap
| Fuel type | Typical BIK band position | Relative company car tax cost |
|---|---|---|
| Electric (0g/km) | Lowest available band | Lowest |
| Plug-in hybrid, long electric range | Low-to-mid band | Moderate |
| Plug-in hybrid, short electric range | Mid band | Higher |
| Petrol/diesel, low emissions | Mid-to-high band | Higher still |
| Petrol/diesel, higher emissions | Highest bands (25–37%+) | Highest |
The exact percentage bands change slightly each tax year — always check HMRC's published company car tax tables for the specific 2026/27 percentages rather than relying on older figures, since the electric vehicle taper means each year's rate is marginally higher than the last, by design, as the government gradually reduces the incentive gap over the rest of the decade.
Salary Sacrifice: Still the Most Tax-Efficient Route
An EV salary sacrifice scheme lets an employee give up part of their gross salary in exchange for the use of an electric car, with the employer typically leasing the vehicle. The employee saves Income Tax and National Insurance on the sacrificed salary amount, while paying company car (BIK) tax on the car itself — which, for an EV, remains comparatively low.
| Comparison | Buying/leasing privately | EV salary sacrifice |
|---|---|---|
| Funded from | Net (post-tax) salary | Gross (pre-tax) salary |
| Income Tax/NI relief | None | Yes — on the sacrificed amount |
| BIK tax payable | N/A (not a company car) | Yes, but at the low EV rate |
| Typical net cost | Higher | Lower for most employees |
For higher and additional rate taxpayers in particular, the combined Income Tax and NI saving on the sacrificed salary, set against the still-low BIK tax on the EV, generally produces a meaningfully lower net monthly cost than financing the same car privately — though the exact saving depends on the specific scheme, car, and your personal tax position.
Plug-In Hybrids: A Middle Ground, Not a Shortcut
Plug-in hybrid vehicles (PHEVs) are sometimes assumed to get similar tax treatment to full EVs, but this isn't accurate. PHEVs are taxed on a sliding scale that considers both their CO2 emissions figure and their zero-emission electric range — cars that can travel further on electric power alone attract a lower BIK percentage than those with a short electric range, but every PHEV sits above the flat rate applied to pure electric cars. A PHEV with a short electric range (some older or smaller models) can end up taxed closer to a low-emission petrol car than to an EV.
What to Check Before Choosing an EV Company Car
- Confirm the exact current-year BIK percentage for the specific car's CO2 emissions band via HMRC's published tables — don't rely on last year's figures given the annual taper.
- Get the car's P11D value (not just the list price — it can include delivery, VAT and optional extras) from your employer or the leasing company.
- Calculate the taxable benefit and multiply by your marginal Income Tax rate to see the actual annual cost.
- If offered as salary sacrifice, compare the net monthly deduction against the cost of financing or leasing the same car privately, factoring in insurance, maintenance and charging costs typically bundled into a salary sacrifice scheme.
- Remember employer Class 1A NI costs are also lower for EVs, which is often reflected in more competitive salary sacrifice scheme pricing from employers offering electric options.
Frequently asked questions
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