Company Car Tax Calculator UK 2026/27

How company car tax (BIK) works

A company car you can use privately is a benefit in kind, and HMRC taxes it as if it were extra income. The tax is built in three steps. First, take the car’s P11D value — broadly its list price including VAT, delivery and most options, minus any capital contribution you paid towards it. Second, multiply it by the “appropriate percentage”, which is set by the car’s CO2 emissions and, for plug-in hybrids, by its electric-only range. Third, multiply that taxable benefit by your marginal income tax rate: 20%, 40% or 45%. Your employer also pays Class 1A National Insurance at 15% on the same benefit in 2026/27, but that is the employer’s cost, not yours.

The appropriate percentage is where the money is. For 2026/27 it runs from 4% for a zero-emission electric car to a maximum of 37% for the highest-emission cars. A petrol car emitting 120 g/km sits at 30%; one emitting 155 g/km or more hits the 37% cap. Diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard add 4 percentage points on top, still capped at 37%. Most diesels registered in the last few years are RDE2 compliant, so check the V5C or the manufacturer’s spec sheet before assuming the supplement applies.

BIK percentages for 2026/27 (GOV.UK 480 Appendix 2)

From 55 g/km the percentage rises by one point for each 5 g/km band, except that it holds at 21% for both 70–74 and 75–79. The full table is on GOV.UK. Note also that the electric rate is scheduled to rise: 5% in 2027/28, then 7% in 2028/29 and 9% in 2029/30, with the maximum rising to 38% and then 39%. Even at 9%, an electric car will still cost far less in BIK tax than a typical petrol car.

Worked examples: £40,000 car, higher-rate taxpayer (40%)

The gap between the electric car and the petrol car is £4,160 a year for the same list price. That is the whole story of company car tax in 2026/27: the tax system heavily rewards low CO2. It also means the choice of car matters far more than the choice of tax band. A basic-rate taxpayer in the 160 g/km petrol car pays £2,960 a year — more than four times what a higher-rate taxpayer pays for the electric car.

Things this calculator does not cover

Fuel benefit: if your employer also pays for your private fuel, that is a separate benefit, worked out from the car fuel benefit multiplier of £29,200 for 2026/27 multiplied by the same appropriate percentage, then taxed at your marginal rate. On a 30% car that adds £8,760 of taxable benefit, or £3,504 a year for a higher-rate taxpayer — which is why taking free private fuel is often poor value unless you drive a very high private mileage. Salary sacrifice, cars first registered before 1998, cars with no approved CO2 figure, classic cars, pool cars and shared cars all have their own rules. And from 6 April 2027, benefits including company cars must be payrolled, which changes how the tax is collected (through your pay, month by month) rather than how much is due. If any of those apply, check the GOV.UK guidance or speak to your employer’s payroll team.

Salary sacrifice and changing cars mid-year

Many employers now offer electric cars through salary sacrifice, where the lease cost comes out of your gross pay before tax and National Insurance. The BIK tax still applies — 4% of the P11D value in 2026/27 — but because the lease payment reduces your taxable pay, the overall saving can be large, especially for higher-rate taxpayers. The exact saving depends on your tax band, your pension, and whether the sacrifice takes your pay below the National Minimum Wage, which it must not do. Salary sacrifice is not the same as a company car you are simply given: with sacrifice you are paying for the car out of your own pay, so compare the sacrificed amount plus the BIK tax against the cost of running your own car before you sign.

If you change cars during the tax year, the BIK tax is worked out separately for each car for the months you had it, so a mid-year switch does not mean paying a full year’s tax on both cars. If a car is unavailable for a period of 30 days or more — for example, it is off the road for repairs — the benefit is reduced for that period. And if you pay your employer something towards the private use of the car, that payment comes off the taxable benefit. All of these are details for your payroll team rather than this calculator, but they are worth knowing about, because the simple annual figure can overstate what you owe when your year has not been simple.

What counts in the P11D value?

The P11D value is not quite the price on the windscreen. It is the list price including VAT and delivery, plus most optional extras — metallic paint, a tow bar, upgraded wheels — minus any capital contribution you paid towards the car yourself. Accessories fitted after delivery, such as a roof box you bought separately, do not count. If you are unsure of the figure, it is on your P11D form, or your employer’s payroll team can confirm it. A small difference in the P11D value makes a small difference in the tax: on a 30% car, every £1,000 of P11D value adds £300 of taxable benefit, which is £120 a year for a higher-rate taxpayer. So it is worth getting the figure right, but a round-number estimate is close enough for planning.

Related: Fuel Cost Calculator · PCP vs HP Calculator · Income Tax Calculator 2026/27

Sources: GOV.UK, “Work out the appropriate percentage for company car benefits (480: Appendix 2)”, tax year 2026 to 2027; GOV.UK, Annex A rates and allowances (Budget 2026) for future BIK rates and the 4% diesel supplement; GOV.UK, car fuel benefit charges 2026/27 (multiplier £29,200). Checked 13 November 2026.