Company Car BIK 2026/27 | Benefit-in-Kind Rates & Examples

When your employer provides a company car for personal use, you pay Income Tax on a Benefit-in-Kind (BIK) — a percentage of the car's P11D value set by its CO₂ emissions. For 2026/27 pure electric cars sit at a 4% BIK rate, while petrol and diesel cars range from 17% up to 37%, with a 4% supplement for non-RDE2 diesels, subject to the cap. The benefit itself is not subject to employee Class 1 National Insurance.

The P11D value — list price including VAT, delivery and most optional extras — is the base for everything, so accessories can quietly inflate your bill. Calculate your exact tax with the Company Car BIK Calculator→, and compare the company-car route against a cash allowance with the Salary Calculator→.

BIK Rates for 2026/27

The BIK percentage comes from the WLTP CO₂ figure. Zero-emission cars pay 4%; plug-in hybrids (1–50 g/km) pay 4% to 16% depending on electric range; and everything from 51 g/km upwards follows the table below, rising 1% for every 5 g/km step up to the 37% cap.

Diesel cars that do not meet the RDE2 standard pay an extra 4%, capped at 37%. Most diesels registered from September 2018 are RDE2-compliant, so check your registration before assuming the supplement applies.

Worked Examples

Example 1 — Electric. A Tesla Model 3 with a £50,000 P11D value and 0 g/km emissions attracts 4% BIK: a £2,000 taxable benefit. A basic-rate taxpayer pays £400 a year, a higher-rate taxpayer £800, and an additional-rate taxpayer £900 — for a car whose full list price would cost far more to lease personally.

Example 2 — Diesel. A BMW 3 Series at £42,000 P11D and 128 g/km attracts 31% BIK, plus 4% for non-RDE2 compliance — 35% in total. The benefit is £14,700, and a higher-rate taxpayer pays £5,880 a year. That is an illustrative benefit-waste comparison; the private lease price must be checked separately.

The Fuel Benefit Charge

If your employer pays for all private fuel in a petrol or diesel car, an additional fuel benefit is added: the fixed HMRC multiplier of £29,200 for 2026/27, multiplied by your car's BIK percentage. A car at 31% BIK therefore carries a £9,052 fuel benefit on top of the car benefit — taxable at your marginal rate. You can normally eliminate the charge by reimbursing your employer for all private fuel within HMRC's deadline or by having them stop paying for private fuel. Electric cars do not have a car-fuel benefit charge for electricity provided by the employer.

What Counts in the P11D Value

The P11D value is broadly the manufacturer's list price at first registration, including VAT, delivery charges and most optional extras fitted when the car was made available. The first registration fee and annual road tax are excluded. A capital contribution can reduce the value subject to the statutory limit and detailed rules; payments for private use can also reduce the cash equivalent. Accessories added later may affect the benefit if they become part of the car's relevant list price or equipment. Ask your employer for the exact reported figure rather than estimating from the sticker price.

Availability dates and part-year calculations

The car benefit is linked to the period in which the car is available for private use. If you receive the car after 6 April or return it before 5 April, the annual cash equivalent is adjusted for the number of days it was available. A replacement car can create two separate availability periods and two different appropriate percentages. Keep the handover date, return date, replacement date and any period when the car was unavailable because of a prolonged repair.

The tax year is not the same as the calendar year. The 2026/27 rates apply from 6 April 2026 to 5 April 2027. A car ordered in 2025 but delivered in 2026 must be assessed using its relevant registration, CO₂ evidence, P11D value and availability facts; the order date alone does not establish the benefit. Ask the employer which HMRC worksheet and approved emissions figure were used.

Check the approved emissions and electric range

Use the CO₂ figure approved for company-car benefit purposes, not an advertisement's rounded figure or a separate environmental label. For a plug-in hybrid, the electric range affects the appropriate percentage, so obtain the manufacturer's or HMRC-required range evidence. Two cars with similar list prices can have very different BIK because their approved CO₂ figures and electric ranges fall into different bands.

For a diesel, check whether the vehicle meets the relevant RDE2 condition using the registration or manufacturer evidence. The 4% supplement applies only where the diesel does not meet the condition and remains subject to the maximum percentage. Do not add the supplement to every diesel by default, and do not assume that a “hybrid” label removes the need to check its approved fuel and emissions category.

Private fuel and electric charging are separate questions

The car benefit and the fuel benefit are calculated separately. Petrol or diesel paid for by the employer and available for private use can create the additional fuel benefit, even where the employee's private mileage is low. The employer can normally remove that charge only where the employee reimburses all private fuel within the relevant HMRC deadline or private fuel is no longer provided. A partial reimbursement does not automatically remove the whole charge.

Electricity is not treated as a fuel for the car-fuel benefit charge in the same way as petrol or diesel. That does not mean every charging arrangement is tax-free: home charging, workplace charging, public charging reimbursement and a charging card can have different payroll facts. Ask whether the employer owns the charger, reimburses actual electricity, provides a public network card or pays a mileage amount, and check the current HMRC treatment for that arrangement.

Salary sacrifice and optional remuneration

Salary sacrifice does not make a high-emission car immune from the optional remuneration rules. For cars made available under an optional remuneration arrangement, the taxable amount can be the higher of the normal company-car cash equivalent and the salary foregone, subject to the statutory exceptions and detailed HMRC conditions. Electric and qualifying low-emission cars have specific treatment, but the lease quote is not enough to determine the tax result.

Compare the salary surrendered, employer pension or NI effects, BIK, insurance, servicing, charging or fuel, excess mileage and early-termination terms. A £500 monthly lease is not a £500 reduction in take-home pay, and the saving depends on the employee's marginal tax and NI position. If the salary sacrifice ends when the employee changes job or takes leave, the contract terms can matter more than the headline BIK percentage.

Employer and employee reconciliation

Employers should reconcile the car register, P11D information, payroll records and Class 1A National Insurance calculation. Record the vehicle, registration, approved CO₂ figure, P11D value, fuel type, RDE2 status, availability dates, employee contributions and private-fuel status. If a car changes during the year, retain both calculations and the dates that separate them.

Employees should compare the P11D or payrolled-benefit figure with the car actually supplied. Report a change in car, private-fuel arrangement, contribution or availability to payroll. A tax code can be based on estimated benefits and may be corrected later through PAYE or Self Assessment; do not assume that an unchanged tax code proves the reported car value is correct.

A decision checklist beyond the BIK rate

Before accepting a company car, compare the employer's total package with the alternative cash allowance. Include tax on the allowance, employee NI, personal insurance, servicing, tyres, depreciation or lease cost, charging or fuel, home charging equipment, mileage reimbursement and the risk of leaving the employer early. For an EV, also check whether the employer pays for home installation or public charging and whether the car is available for private use by family members.

The tax rate is only one input. A low-BIK vehicle can still be poor value if the salary sacrifice is high, the contract is inflexible or the employee would otherwise drive very few miles. Conversely, the taxable benefit can be attractive where the employer carries insurance, maintenance and depreciation. Use the calculator for arithmetic, then verify the written vehicle and payroll terms before deciding.

Common Mistakes and How to Avoid Them

The most common errors are forgetting the diesel supplement on non-RDE2 cars, ignoring the fuel benefit charge when private fuel is paid by the employer, and using the wrong tax year's BIK table — the EV rate was 3% in 2025/26 and is 4% in 2026/27. Employees also miss that BIK sits on top of salary for tax purposes, so a large benefit can push income across the £50,270 higher-rate threshold and tip you into the 60% effective trap above £100,000. Check your tax code each April: HMRC adjusts it for the car benefit, and an out-of-date code means underpaid tax collected later.

Salary Sacrifice for EVs

Some employers offer electric cars through salary sacrifice. You give up gross salary equal to the lease cost, which may save Income Tax and employee NI, while the employer may save secondary NI; whether any saving is shared is a scheme decision. The BIK itself is low at 4%, so the net monthly cost of a £500 lease may fall after tax and NI savings, plus about £67 a month of BIK tax for a £50,000 EV at 40% Income Tax. For cars with CO₂ above 75 g/km, OpRA generally taxes the higher of the modified cash equivalent or salary foregone, subject to detailed rules.

Reporting and How to Reduce Your Bill

Your employer generally reports the car and fuel benefits on form P11D by 6 July following the tax year, unless the benefit is payrolled under the applicable process; the value may flow into your tax code or Self Assessment. To cut the bill: choose an EV at 4%, avoid the diesel supplement by checking RDE2 status, pay for private fuel within the relevant deadline if appropriate, and verify optional extras — every £1,000 included in the relevant value adds £40 of taxable benefit at the 4% EV rate. Salary sacrifice results depend on the scheme and your tax position.

Frequently Asked Questions

Run your car through the Company Car BIK Calculator→ and compare with a cash allowance using the Salary Calculator→. Pair this guide with Electric Car BIK UK 2026/27 and Cash Allowance vs Company Car UK for the full decision picture.

Official sources

• GOV.UK: Company car benefit appropriate percentages
• GOV.UK: Travel, mileage and fuel rates
• GOV.UK: Tax on company cars
• GOV.UK: Optional remuneration arrangements
• GOV.UK: Class 1A National Insurance 2026
• GOV.UK: Car fuel benefit multiplier

These GOV.UK pages are the official references for company-car valuation, fuel, optional-remuneration and employer National Insurance rules. Recheck the current tax year and vehicle emissions data before relying on an estimate.