Company Car Tax Calculator 2025/26

What is company car tax (Benefit in Kind)?

Company car tax is a Benefit in Kind (BIK) charge that you pay when your employer provides you with a car for private use. The tax is based on the car's P11D value (list price including options and delivery, minus the first year registration fee and vehicle excise duty) multiplied by a BIK percentage that is determined by the car's CO2 emissions and fuel type. You then pay income tax on this taxable benefit at your marginal rate.

What is the BIK rate for electric cars in 2025/26?

The BIK rate for fully electric cars (zero emissions) is 2% for 2025/26. This makes electric vehicles significantly cheaper as company cars compared to petrol or diesel equivalents. For example, a £40,000 electric car would generate a taxable benefit of just £800 per year (£40,000 x 2%), costing a 40% taxpayer only £320 per year. The EV BIK rate is set to rise to 3% in 2026/27 and 4% in 2027/28, but it remains far below rates for combustion engine vehicles.

How are BIK percentages calculated for petrol and diesel?

BIK percentages for petrol cars range from 2% for zero emissions up to 37% for CO2 emissions of 170 g/km or more. Diesel cars that do not meet the RDE2 emissions standard pay a 4% supplement on top of the petrol rate, capped at 37%. Hybrid vehicles have their own set of rates based on their electric-only range and CO2 emissions. The higher the emissions, the higher the BIK percentage and the more tax you pay.

What is the P11D value?

The P11D value is the car's list price including VAT, optional extras, and delivery charges, but excluding the first year registration fee and vehicle excise duty (road tax). This figure is used as the base for calculating your BIK charge. You can find your car's P11D value on HMRC's company car and car fuel benefit calculator, or your employer should provide it to you. Accessories added after the car was first made available can also increase the P11D value.

Is a car allowance better than a company car?

A car allowance is a cash payment from your employer instead of a company car. Unlike BIK, a car allowance is treated as salary and subject to income tax and National Insurance. Whether it is cheaper depends on the BIK rate of the car you would have received. For high-emission petrol or diesel cars, a car allowance is often cheaper. For electric vehicles with the 2% BIK rate, a company car is almost always more tax-efficient than a cash allowance.

Do I pay tax on fuel for a company car?

If your employer pays for private fuel, you face an additional fuel benefit charge. The fuel benefit is calculated by multiplying a fixed amount (£27,800 for 2025/26) by the same BIK percentage used for the car. This can be a substantial additional tax cost. If you reimburse your employer for all private fuel, no fuel benefit charge applies. Many employees find it cheaper to pay for their own private fuel rather than accepting the fuel benefit.

How do I report my company car?

Your employer reports your company car on a P11D form submitted to HMRC by 6 July after the end of the tax year. The BIK amount is included in your tax code, so the tax is collected through PAYE throughout the year. If your car changes during the year, your employer should update HMRC and your tax code will be adjusted. You should check your tax code to ensure the correct car benefit is being applied.