How to calculate company car tax PLUS official BIK tax rates from 2026 to 2030

Benefit-in-kind taxation. Doesn’t sound very good, does it. Sort of “here’s a well-earned boost for you, but you’re going to have to pay more tax to keep it”. For company car drivers, that means, in effect, that you can have a shiny new business vehicle every few years, but you’ll have to pay an increased sum to the taxman each month in the form of Benefit-in-Kind (BiK) taxation. Great, thanks.

But what if there was a way for you to make the most of that company car while keeping your monthly tax outgoings to a minimum?

Well, there are a number of things you can do to stop the taxman having your cake and eating it.

Read on to discover the best ways to reduce the amount you pay each month for the privilege of running a company car.

What is company car tax?

Company car tax is the amount you’ll have to pay on annual basis for the perk of being able to run a company car that is also available to use for private mileage. His Majesty’s Revenue and Customs (HMRC) treats this benefits as part of your overall income, which means you have to pay additional taxation on it.

This extra tax is usually paid as part of the monthly deductions that come out your salary, and the amount is dependent on a number of factors, including your company car’s value, the amount of CO2 it emits, and the tax bracket your salary places you in.

P11D value

Your company car’s P11D value is the list price including VAT, options, and delivery. However, the first-year registration fee and road tax are not included in the calculation.

BiK percentage rate

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 income tax band

Your personal tax band (basic 20%, higher 40%, or additional 45%) has a huge effect on how much BiK you pay each year.

How to work out your company car tax rate

The formula is: P11D value × BIK rate × your tax rate = annual company car tax.

Read more: Cheapest company cars for BIK tax

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

BIK rates for 2026 to 2027

BIK rates change each tax year and vary by fuel type. This comparison table provides a quick reference.

Petrol and diesel BIK rates

Current rate bands apply to petrol cars, and a diesel supplement applies to non-RDE2 compliant diesels.

Hybrid BIK rates

Plug-in hybrids benefit from lower rates based on their electric range and CO2 output, with specific brackets for different ranges.

Electric vehicle BIK rates

The current BIK rate for zero-emission vehicles is set, with planned rates confirmed through 2027-28.

How CO2 emissions affect your tax

Your next company car’s CO2 emissions directly affect how much you’ll pay in BIK percentage, so every gram per kilometre matters.

• Lower emissions = lower BIK rate: Cars producing less CO2 attract a smaller charge.

• Diesel supplement: non-RDE2 diesels face an additional 3% percentage penalty.

• Electric range matters for hybrids: plug-in hybrids that offer a long electric-only range qualify for lower bands.

Electric and hybrid company car tax explained

This section addresses the specific rules for electrified vehicles, since these offer the biggest tax savings.

Zero-emission vehicles

Pure electric cars qualify for an ultra-low BIK rate of just 4%, which is why they’re the most tax-efficient choice. This will rise to 5% in 2027-28.

Plug-in hybrids

The rate for plug-in hybrids is dependent on how much CO2 they emit and how far they can travel on a battery charge, so you need to check out these figures before settling on a specific model.

Full hybrids and mild hybrids

Full hybrid cars and mild hybrids are taxed in the same way as pure petrols or diesels because they cannot plug in or travel any distance on pure-electric power.

Read more: How to pay less BIK tax

How much is a company car worth in salary terms

To calculate the equivalent salary value of a company car, add your tax bill to any contribution you make, then compare that total to the car’s lease or purchase cost. Lower-emission cars close this gap significantly.

Factors to consider include:

• Your tax bill: the BIK amount based on emissions and your tax band.
• Insurance and maintenance: costs typically covered by your employer.
• Fuel benefit charge: additional tax if your employer pays for private fuel.
• Depreciation: a hidden cost you avoid with a company car.

Company car vs cash allowance

Here we help you to compare the two directly so you can work out which better suits your situation.

Advantages of a company car

• No depreciation risk: the car’s value loss is factored into the leasing payments paid by your employer.
• Maintenance included: leasing agreements typically also include servicing and repair costs.
• Insurance sorted: this is usually arranged and paid by your company’s fleet manager.
• Lower tax on EVs: electric company cars attract minimal BIK.

 Advantages of a cash allowance

• Freedom of choice: you can buy or lease any car you like.
• Keep the cash: if you already own a suitable car, you can simply pocket the allowance.
• No BIK tax: you’re taxed on the allowance as income, but there’s no separate car tax.

Which option saves you more?

This is dependent on your circumstances and the type of car you’re looking at as a company vehicle. Use What Car?’s company car tax calculator on company car options and compare it against the take-home value of a cash allowance.

Read more: The cheapest company cars in every class

Three ways to cut your company car tax bill

 1. Choose an EV or plug-in hybrid

Choosing an electric company car is the easiest way to cut your company car tax bill. That’s because electric cars and SUVs are subject to a BIK rate of a mere 4% (rising to 5% in 2027).

To give you an idea of the potential savings, we put the details of the Ford Puma and the pure-electric Puma Gen-e into the What Car? company car tax calculator, and the results are stark:

Ford Puma 1.0T EcoBoost MHEV Sounds Edition (petrol)

Annual BIK tax for a 20% taxpayer: from £2072

Annual BIK tax for a 40% taxpayer: from £4145

Ford Puma Gen-e (electric)

Annual BIK tax for a 20% taxpayer: from £274

Annual BIK tax for a 40% taxpayer: from £548

In other words, if a 40% taxpayer runs an EV as a company car, they’ll almost save well into five figure in just three years. That’s an extremely nice holiday every year.

2. Avoid fuel paid for by your employer

If you go for employer-paid fuel for personal miles as well as business ones, then you’ll be liable for a separate fuel benefit charge. When fuel prices are low, then the charge can cost you more than the fuel, although the opposite applies when fuel is expensive.

3. Consider salary sacrifice

The clue is in the name – you give up part of your monthly salary and in return you get a non-cash benefit, which is often in the shape of a car.

There’s an additional benefit in that your monthly income tax and National Insurance are based on the portion of your salary that’s left after the sacrifice has been made, so are lower.

Yes, you’ll still face a BiK tax charge each month, but if you choose an EV, that cost will be minimal.

How your company car tax is paid

The tax cade produced by HMRC automatically takes account of your company car, and is collected automatically through PAYE each month. HMRC knows about your car’s details because your employer will have submitted a P11D form detailing everything.

Find the best company cars for low tax

What Car?’s company car reviews and deals tell you everything you need to know. Our car company car tax calculator and in-depth reviews help you compare BIK costs across models before you choose.

Read more: The best company cars in the UK

Company car tax rates from 2026 to 2030

Below are the benefit-in-kind (BIK) tax bands for petrol, hybrid, plug-in hybrid and electric cars in the 2026-2027, 2027-2028, 2028-2029 and 2029-2030 tax years to help you calculate what you'll pay in this financial year — and the years to come.

More fleet car advice and BIK tax calculator

For all the latest reviews, advice and new car deals, sign up to the What Car? newsletter here