EV Company Car Tax 2026/27: BIK Rate, P11D and Salary Sacrifice Explained

For anyone considering a company car in 2026/27, the Benefit in Kind numbers for electric vehicles versus petrol or diesel are striking. With an EV BIK rate of just 4%, a GBP 45,000 electric car costs a higher-rate taxpayer around GBP 720 per year in income tax. The equivalent petrol car could cost GBP 5,000 to GBP 7,000 per year in BIK tax alone. This guide shows you exactly how the numbers work.

How Company Car BIK Tax Works

Company car tax -- officially Benefit in Kind (BIK) tax -- is charged on the value of the car you receive from your employer. The calculation is:

P11D value x BIK percentage = Taxable benefit

You pay income tax on the taxable benefit at your marginal rate (20%, 40%, or 45%).

Your employer pays Class 1A National Insurance at 15% on the same taxable benefit value.

The P11D value is the car's list price when new, including manufacturer-fitted options and delivery charges, but excluding the first registration fee (GBP 55) and annual Vehicle Excise Duty.

The BIK percentage depends on the car's CO2 emissions. Electric cars have a separate low rate, rising gradually through the 2020s.

BIK Rates for Electric Cars: 2025/26 to 2030/31

Even at 13% in 2030/31, electric cars will be cheaper in BIK terms than most petrol equivalents, which sit at 20% to 37% today.

Worked Example: GBP 45,000 EV vs Petrol

Both cars have a P11D value of GBP 45,000. The driver is a higher-rate taxpayer (40% income tax rate).

Electric car (4% BIK, 2026/27)

• Taxable benefit: GBP 45,000 x 4% = GBP 1,800
• Employee income tax: GBP 1,800 x 40% = GBP 720 per year
• Employer Class 1A NI: GBP 1,800 x 15% = GBP 270 per year

Petrol car with 150g/km CO2 (30% BIK, 2026/27)

• Taxable benefit: GBP 45,000 x 30% = GBP 13,500
• Employee income tax: GBP 13,500 x 40% = GBP 5,400 per year
• Employer Class 1A NI: GBP 13,500 x 15% = GBP 2,025 per year

Annual employee saving by choosing the EV: GBP 4,680 Annual employer saving by choosing the EV: GBP 1,755

Salary Sacrifice: Making the EV Even More Tax-Efficient

Many employers offer electric cars through salary sacrifice schemes. You agree to give up a portion of gross salary in exchange for the car lease. The key benefit: the sacrificed salary is not subject to income tax or employee National Insurance.

How it works for a basic-rate employee:

• Salary: GBP 35,000 per year
• Monthly sacrifice for GBP 40,000 EV: GBP 600 (GBP 7,200 per year)
• BIK on car: GBP 40,000 x 4% = GBP 1,600
• Income tax on BIK: GBP 1,600 x 20% = GBP 320 per year

Without sacrifice, GBP 7,200 of salary would attract 20% income tax + 8% employee NI = GBP 2,016 in tax. Under salary sacrifice, the only tax cost is GBP 320 per year on the BIK.

The employer also saves 15% employer NI on the sacrificed salary: 15% x GBP 7,200 = GBP 1,080 per year. Many employers pass some of this saving back to the employee, reducing the effective monthly cost of the car further.

Salary Sacrifice: Things to Check

• Impact on borrowing: Mortgage lenders may assess affordability based on post-sacrifice salary. Discuss with your mortgage adviser before entering a long sacrifice agreement.
• Impact on pension contributions: If employer pension contributions are based on pre-sacrifice salary, the sacrifice should not reduce them. Check your scheme rules.
• Minimum wage: Sacrifice must not take your hourly pay below the National Living Wage of GBP 12.71 per hour in 2026/27.
• Contract length: Most salary sacrifice EV agreements run two to four years. Consider whether the BIK rate schedule suits the contract term.

P11D Value: What Is and Is Not Included

For electric cars, the P11D value can be substantial. Premium EVs often exceed GBP 60,000 to GBP 90,000. At 4% BIK, a GBP 80,000 EV still produces a taxable benefit of just GBP 3,200 per year.

Charging: The Tax Treatment

Workplace Charging

Electricity provided through a workplace charge point is completely tax-free for the employee -- for both company cars and personally owned EVs. There is no monetary limit on this exemption. It applies even if the employee charges a private car, not just the company car.

Business Mileage Reimbursement

HMRC sets the Advisory Electricity Rate (AER) at 7p per mile for electric company cars in 2026/27. Employers can pay up to 7p per mile for business journeys tax-free. Any excess is taxable.

Home Charger Installation

Where an employer pays to install a charge point at an employee's home, this is a taxable benefit. The value is assessed on the installation and equipment cost in the year it is provided. Check current HMRC guidance before assuming home charger installations are tax-free.

Employer Reporting: P11D and P11D(b)

Employers must report taxable benefits using form P11D for each employee (submitted by 6 July following the tax year) and form P11D(b) to declare the total Class 1A NI due (paid by 19 July, or 22 July for electronic payment).

For salary sacrifice arrangements, the car benefit is reported as a Type P benefit on the P11D. The sacrificed salary reduces the amount subject to PAYE and NI through the payroll.

Is an EV Company Car Worth It in 2026/27?

For most employees who would otherwise fund a car from net income, an electric company car -- especially under salary sacrifice -- is extremely tax-efficient in 2026/27. The 4% BIK rate keeps tax costs very low against the full market value of the vehicle.

The rate schedule does rise year on year. Employees considering a new company car agreement should model the BIK cost across the full lease term, not just the first year.

Calculate Your Exact BIK Tax Position

Our CalcHub company car tax calculator lets you enter the P11D value and BIK percentage of any car and see your precise income tax cost at basic, higher, or additional rate -- plus the employer Class 1A NI. You can also model the salary sacrifice scenario to see how your take-home pay changes compared to keeping the equivalent cash salary. Use it before accepting or changing a company car agreement to make sure the deal works in your favour.