Company car tax guide 2026: calculate BIK rates to 2030
In our company car tax guide, we explain how benefit-in-kind (BIK) rates work in the UK and list all the BIK tax bands from April 2026 to March 2030...
The main advantage of owning a company car is that you can, in essence, have a shiny new business vehicle every few years. It's a huge advantage for many employees, but the downside is that it does come with something called a benefit-in-kind (BIK) tax.
This is a bit like your company saying "here's a well-earned boost for you", and then the taxman jumping out and adding "but you'll have to pay more tax to keep it". It's quite the predicament.
But what if there was a way for you to make the most of your company car, while keeping your monthly tax outgoings to a minimum?
Read more: Fleet car advice and BIK tax calculator
Well, there are a number of things you can do to stop the taxman having your cake and eating it. For starters, the What Car? Company Car Tax Calculator is your ideal assistant, because it helps you to work out the monthly cost of your fleet vehicle.
For more tips on the best ways to reduce the amount you pay each month for the privilege of running a company car, keep reading...
How to calculate your company car tax
There are three main elements that allow you to work out your company car tax calculation: the vehicle’s P11D value, its emissions-based BIK percentage, and your personal income tax band.
The car’s P11D value is comprised of its list price plus VAT, the cost of any options, and any delivery fee.
The BIK rate is based on how much CO2 your car emits and which fuel it uses. The lower the CO2 emissions, the lower your BIK rate.
Your personal tax band (basic 20%, higher 40%, or additional 45%) has a huge effect on how much BIK you pay each year.
The formula is: P11D value × BIK rate × your tax rate = annual company car tax
For example: A BMW 2-Series 220i M Sport Coupé has a P11D price of £39,225 and CO2 emissions of 148g/km, placing it into the 35% band for BIK taxation. So, £39,225 multiplied by 35% is £13,729. Multiply this by 20% for a lower-rate taxpayer and you have an annual bill of £2746 – or £229 per month.
Official BIK tax bands 2026 to 2027
For petrol and hybrid-powered cars for the tax year 2026 to 2027:
| CO2 emissions (grams per km) | Electric mileage range | NEDC % | WLTP % |
| 0 | 130 and above | 4 | 4 |
| 1 to 50 | 70 to 129 | 4 | 4 |
| 1 to 50 | 40 to 69 | 7 | 7 |
| 1 to 50 | 30 to 39 | 10 | 10 |
| 1 to 50 | Less than 30 | 14 | 14 |
| 1 to 50 | – | 16 | 16 |
| 51 to 54 | – | 17 | 17 |
| 55 to 59 | – | 18 | 18 |
| 60 to 64 | – | 19 | 19 |
| 65 to 69 | – | 20 | 20 |
| 70 to 74 | – | 21 | 21 |
| 75 to 79 | – | 21 | 21 |
| 80 to 84 | – | 22 | 22 |
| 85 to 89 | – | 23 | 23 |
| 90 to 94 | – | 24 | 24 |
| 95 to 99 | – | 25 | 25 |
| 100 to 104 | – | 26 | 26 |
| 105 to 109 | – | 27 | 27 |
| 110 to 114 | – | 28 | 28 |
| 115 to 119 | – | 29 | 29 |
| 120 to 124 | – | 30 | 30 |
| 125 to 129 | – | 31 | 31 |
| 130 to 134 | – | 32 | 32 |
| 135 to 139 | – | 33 | 33 |
| 140 to 144 | – | 34 | 34 |
| 145 to 149 | – | 35 | 35 |
| 150 to 154 | – | 36 | 36 |
| 155 to 159 | – | 37 | 37 |
| 160 to 164 | – | 37 | 37 |
| 165 to 169 | – | 37 | 37 |
| 170 and above | – | 37 | 37 |
As the above table demonstrates, the higher the car’s emissions, the greater the BIK taxation levied upon it. The electric-only range offered by plug-in hybrid electric vehicles (PHEVs) also has a huge effect on the BIK percentage – the further a car can travel on battery power alone, the lower the rate.
Future tax outlook: BIK rates 2027 to 2028
His Majesty’s Revenue and Customs (HMRC) will increase the BIK taxation for electric cars from 4% (in 2026/27) to 5% for the 2027/28 financial year, although the rate will be capped at this thereafter.
Vehicles with CO2 emissions of between 1g and 50g per kilometre, plus a battery-only range of less than 30 miles, will have BIK percentages of 18% in 2028/29 and 19% from 2029/30.
The relevant percentages for all other emission bands will increase by 1% per year in 2028/29 and 2029/30, and the top band for high-emissions vehicles will rise to 38% for 2028/29 and 39% for 2029/30
Why electric cars remain the tax-efficient choice
Beneficial tax rates make electric vehicles by far the most cost-efficient choice as company cars. An EV draws BIK tax at just 4%, whereas a petrol car could quite easily reach 30%. However, the effectiveness of an EV as a company car can vary significantly, depending on the amount of range your chosen car provides. If you regularly complete long journeys, you'll need to charge more frequently, which could prove a hindrance.
Petrol and diesel: the cost of combustion
The RDE2 (Real Driving Emissions Step 2) standard is the current way to measure a car’s emissions, and has been used since 2020. The assessment is carried out in real-world driving conditions, and provides a correlation with the Worldwide Light Vehicle Testing Procedure (WLTP), which is carried out in a laboratory.
The news is not good if you drive an older, non-compliant diesel, because this will be subject to a 4% surcharge. In short, if the emissions suggest your diesel should be in the 18% tax band, you’ll actually pay BIK at 22%. This is why diesel makes financial sense only for drivers who do an exceptionally high mileage, allowing them to ‘make back’ the extra cost through a diesel’s greater economy.
Company car alternatives
Salary Sacrifice: Under a salary-sacrifice scheme, an employee ‘gives up’ part of their pre-tax salary in exchange for a new company car. Doing this also lowers income tax and helps them save on National Insurance costs.
Cash Allowance: This process grants an employee an extra gross monthly sum instead of a company car, which allows them to buy and run a vehicle of their choice. However, the extra amount is liable for extra income tax, on top of which, they're liable for the car’s running costs.
Pool Cars: This is a company vehicle that is kept overnight at the business premises, and which is used purely for work trips during the day. In this way, an employee can use the car but will not be liable for BIK tax on it.
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FAQs
Yes, you can make capital contributions of up to £5,000 to reduce the P11D value.
Yes, via a "fuel benefit" multiplier (e.g., £28,200 for 2025-26). This can be a double-edged sword, in that when fuel prices are low, the charge can cost you more than the fuel, but when fuel is expensive, you can be quids in.
You will be liable for BIK taxation separately on each company car.
