How to calculate company car tax PLUS official BIK tax rates from 2025 to 2030

Businesses have been rewarding staff or drawing in new employees with the offer of a company for decades.

And there are numerous reasons why the company car has been around for so long. For a start, a company’s fleet manager can sleep at night knowing that staff are driving around in cars that are fit for purpose, safe and efficient enough to keep running costs down. At the same time, the staffer gets to drive around in a thoroughly up-to-date car or van, and has the joy of telling neighbours and friends all about it.

But if you’re being offered a company car, you need to do some research; a few simple sums will let you work out if a fleet car is going to be the most cost-effective solution for you and your life.

And that is exactly where this What Car? guide to company car taxation comes in. We can help you to understand the company car system, and then we can help you to narrow down the ideal vehicle, and get it for the right price.

How to work out your company car tax

If you’re the same as most other company car users, and do personal miles in your car as well as business ones, then you’ll be liable to Benefit-in-Kind (BIK) tax. This makes it essential that you work out exactly how much you’ll have to pay each month to HMRC before you settle on a new car.

To do this, you need to work out your potential car’s P11D value, which is made up of the list price, including VAT and delivery charges, but excludes the first registration fee or the first year of road tax (VED). This is where you need to beware the options list, because adding a load of extras will push up the P11D price, and therefore raise the amount you’ll need to pay each month to HMRC in BiK.

Next, look up the car’s CO2 emissions, because HMRC categorises cars in bands according to how much CO2 they emit. You’ll be able to find the carbon dioxide emissions figure for any car on the manufacturer’s website, or you could use the What Car? Company Car Tax Calculator.

This CO2 banding is why electric cars have rocketed in popularity among company car user-choosers – EVs emit precisely zero CO2, so draw very low tax rates.

Plug-in hybrids (PHEVs) are another popular option, because they blend the benefits of petrol and electric power. Better still, the distance that a PHEV can be driven on electric power alone (i.e. with the engine turned off) also affects the  car’s the BIK rate.

Read more: Cheapest company cars for BIK tax

Working this all out can seem daunting, but in short, the more expensive a vehicle is, and the more CO2 it emits, the more you’ll have to pay in company car tax.

Tax bands run from 3% to 37% for the 2025-26 tax year. Yes, different rates apply depending on whether the car was registered before or after 6 April 2020 (the date official CO2 output moved from NEDC test figures to the WLTP protocol), but most company cars will be beyond this these days anyway.

So if your company car has a P11D value of £30,000, emits 120g/km of CO2 (which puts it in the 29% BIK bracket – see table below) and you pay tax at 20%, you need to do this calculation:

£30,000 x 0.29 x 0.20 = £1740 per year = £145 each month

As we said earlier, we’ve also got you covered with our company car tax calculator. Simply put in the car you’ve got your eye on into the calculator, and it will generate two taxation figures, one for 20% taxpayers, the other for 40% taxpayers. That way you’ll know exactly what you’ll have to pay each month to the Exchequer.

Read more: How to pay less company car tax

UK company car tax bands from April 2025 to March 2028

Below are the benefit-in-kind (BIK) tax bands for petrol, hybrid, plug-in hybrid and electric cars in the 2025-2026, 2026-2027 and 2027-2028 tax years to help you calculate what you'll pay in this financial year — and the years to come.

UK company car tax bands from April 2028 to March 2030

Below are the benefit-in-kind (BIK) tax bands for petrol, hybrid, plug-in hybrid and electric cars from 2028-2029 to 2029-2030. 

Should I take a company car?

The first thing to bear in mind is that circumstances will be different for everyone, but in general it’s quite likely that you’ll pay less in tax for a new company car than you would financing and running a car privately. In some cases a LOT less — especially if you choose an electric car.

Laying the groundwork beforehand is vital. First up, you need to work out how much you’ll pay each month for a private vehicle (don’t miss out the servicing and running costs). Then you’ll be able to compare that with the costs you’ll face for a fleet car.

Pool car or fleet car: what’s the difference?

A fleet car is yours to use for both work and personal travel. However, a pool car is one that can be used by any employee for work travel, and which tends to remain parked at the workplace overnight.

If you want to use it, you might face a bit of a bunfight to get your hands on the keys (in all likelihood you’ll have to book it), but the upside is that you won’t face a tax bill for use of the car, unless you use it for personal journeys of course.

What's the company car tax on an electric car? EV BIK explained

BIK tax rates are extremely low on electric cars and electric vans, which makes them supremely cost-effective fleet vehicles. However, you’ll need to ensure that the EV you choose has a big enough range for your regular work journeys. You might also need to factor in recharging stops to your daily mileage.

The BIK tax rate on EVs rose to 3% in April 2025, and that cost will increase by 1% each year until 2028. After that, the rate will rise by 2%, then again in 2029, taking it up to 9%.

That is undeniably a rise, but when you work out the numbers you’ll see that you’ll still be paying thousands of pounds less in company car tax each year than someone with a petrol or diesel vehicle.

Read more: The cheapest company cars in every class

The rates for non-EVs are also due to increase from 2028-29 to encourage more people to make the switch to EVs. To that end, the rate for cars with emissions of 1-50g/km of CO2, including hybrid vehicles, will rise to 18% in 2028-29 and 19% in 2029-30.

The rate for all other vehicles will increase by 1% per year in 2028-29 and 2029-30, and at the same times the maximum rate will go up by 1% per year to 38% for 2028-2029 and 39% for 2029-2030.

In short, if you have a petrol or diesel vehicle that emits more than 155g/km of CO2, the tax banding will increase to 38% in 2028-29 and 39% in 2029-30. 

Confused? Our BIK tax calculator can help.

Should I choose a diesel company car?

In today’s world, diesel only really makes sense if you’re a seriously high-mileage driver.

Modern diesels must pass a stringent emissions test, called Real Driving Emissions Step 2, or RDE2 for short, and if they do, there’s no taxation penalty – although the BIK on any petrol or diesel car is stiff.

However, any diesel registered before January 2021 will not be RDE2 compliant, and therefore subject to a four-band taxation penalty, up to a maximum of 37% at present. You’ll have to do an enormous number of miles to make back that cost in fuel savings.

Company car alternatives

There’s a different way to get yourself into a fleet vehicle – called a salary sacrifice scheme. Under this system, you get a shiny new company car, but you also earn a lower salary.

The upside of this is that you pay less income tax and National Insurance, the downside is that your salary is lower, and the car itself is still deemed to be a benefit by HMRC, so you have to pay tax on it.

You could also ignore the company car side of things altogether, and use your own vehicle for work. Your employer is likely to offer you a mileage rate for work journeys, or will cover the cost of fuel for business journeys.

Read more: The best company cars in the UK

On the plus side, you get to drive exactly the car you want, and you could save cash if the mileage rate is higher than your car uses in fuel and consumables. However, you’ll also face finance payments, plus maintenance costs, and these could end up being a lot more costly than the BIK you’d have paid if you’d gone for the company car.

Your employer could also offer you a company car allowance. Under this option, you pay tax on the allowance at your income tax rate, but can then use what’s left to buy the car you want. This is a big plus if your employer offers a limited choice of company cars.

Should you use company fuel?

If you do personal miles using fuel your company has paid for, you’ll face a tax bill for it. However, HMRC has provided a ‘multiplier’ that relates to your company car’s BIK percentage.

For 2025-26, the figure is £28,200, and in exactly the same way as you work out your BIK, you multiply it by your car’s taxation percentage. Then you multiply the resulting figure by your personal income taxation percentage (20% or 40%).

That lets you work out whether or not you’ll do enough personal mileage to make paying the extra tax worthwhile. If you won’t, then it’s worth ditching your company fuel card, because you’ll pay less to fuel the car than you would in tax.

More fleet car advice and BIK tax calculator

Read more: How to pay less BIK tax

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