Company Car Tax 2026/27: EV 4% vs Petrol 17-37% BIK
Company car tax 2026/27: the CO2 bands including 4% for electric, how to work out the BIK on any car, fuel benefit, and what it costs you a month.
If your employer provides a company car you can use privately, HMRC taxes that benefit as income — the “Benefit-in-Kind” or BIK charge. For a petrol or diesel car this can cost a higher-rate driver several thousand pounds a year in extra tax (£3,720 for the £30,000 diesel Golf worked below); for a pure electric car in 2026/27 the same driver pays a few hundred. This guide walks through the 2026/27 BIK rates, shows the calculation, and explains why EV salary sacrifice has been the dominant company-car trend since 2020.
How company car tax works in one formula
Annual BIK charge = (List price of car) × (BIK percentage) × (your marginal Income Tax rate)
All three inputs matter:
- List price — the manufacturer’s P11D value at new (not what was actually paid, and not after discounts). Optional accessories that come with the car when it is first made available to you count whatever they cost; an accessory added later counts only if it costs £100 or more (ITEPA 2003 s.126).
- BIK percentage — set by HMRC based on CO2 emissions (for ICE/hybrid) or the car type (3%, 4%, etc. for pure electric). Rates rise year-by-year under published roadmaps.
- Marginal tax rate — 20% basic, 40% higher, 45% additional. BIK adds to your taxable income, so a BIK charge of £4,000 means you pay tax on £4,000 at your top marginal rate.
2026/27 BIK rates
Pure electric vehicles (zero emissions)
- 2025/26: 3%
- 2026/27: 4%
- 2027/28: 5%
- 2028/29: 7%
- 2029/30: 9%
Plug-in hybrid electric vehicles (PHEV)
Rates depend on CO2 emissions AND electric-only range per the manufacturer’s figure. For a car emitting 1-50 g/km in 2026/27, the range is what sets the rate:
| Electric-only range | BIK % 2026/27 |
|---|---|
| 130+ miles | 4 |
| 70-129 miles | 7 |
| 40-69 miles | 10 |
| 30-39 miles | 14 |
| Under 30 miles | 16 |
A long-range PHEV is therefore taxed identically to a pure EV in 2026/27 — both 4%.
That ends in April 2028. From 2028/29 the range bands are scrapped and every car in the 1-50 g/km band pays a flat 18%, rising to 19% in 2029/30. A 130-mile PHEV goes from 4% to 18% in one step, so a lease signed now that runs past April 2028 should be costed on both numbers.
Petrol and diesel cars
Based on CO2 emissions (g/km):
| CO2 (g/km) | BIK % (petrol / RDE2 diesel) | BIK % (diesel, non-RDE2) |
|---|---|---|
| 51-54 | 17 | 21 |
| 75-79 | 21 | 25 |
| 100-104 | 26 | 30 |
| 125-129 | 31 | 35 |
| 150-154 | 36 | 37 (cap) |
| 160-164 | 37 (cap) | 37 (cap) |
| 170+ | 37 (cap) | 37 (cap) |
Below 51 g/km a car is in the plug-in hybrid table above, where electric range sets the rate rather than CO2 alone.
A diesel certified to the “RDE2” real-driving emissions standard pays the petrol rate (no +4% diesel supplement). Certification is the test, not registration date: when the supplement was raised in April 2018, HMRC said few, if any, cars were likely to meet RDE2 in 2018/19 (HMRC diesel supplement note), so a 2018-2020 diesel should not be assumed to qualify. Check the certificate of conformity; HMRC points to the online vehicle enquiry service for cars made after September 2018 (EIM24705).
For 2027/28 only cars below 75 g/km move: they rise 1 percentage point, to 5% for zero-emission cars and a maximum of 21% for the rest; bands of 75 g/km and above stay at their 2026/27 rates with the 37% cap (HMRC, appropriate percentage 2025 to 2028). From 2028/29 bands of 51 g/km and above rise 1 percentage point a year and the cap rises to 38% in 2028/29 and 39% in 2029/30, while zero-emission cars rise 2 points a year (HMRC, appropriate percentage 2028 to 2030).
Worked examples for 2026/27
Tesla Model 3 (pure electric)
- List price: £45,000
- CO2: 0 g/km
- BIK%: 4%
- Notional BIK income: £45,000 × 4% = £1,800
Tax cost:
- Basic rate (20%): £1,800 × 20% = £360/year (£30/month)
- Higher rate (40%): £1,800 × 40% = £720/year (£60/month)
- Additional rate (45%): £1,800 × 45% = £810/year (£67.50/month)
BMW 330e (plug-in hybrid, 38-mile electric range)
- List price: £52,000
- Electric range: 38 miles (38 → 14% bracket)
- BIK%: 14%
- Notional BIK income: £52,000 × 14% = £7,280
Tax cost:
- Higher rate (40%): £7,280 × 40% = £2,912/year (£243/month)
- Compared to the EV: 4× the tax cost
VW Golf 2.0 TDI (diesel, RDE2)
- List price: £30,000
- CO2: 125 g/km
- BIK% (RDE2 diesel = petrol rate): 31%
- Notional BIK income: £30,000 × 31% = £9,300
Tax cost:
- Higher rate (40%): £9,300 × 40% = £3,720/year (£310/month)
Double-cab pickups (for example a Ford Ranger)
From 6 April 2025 most double-cab pickups are taxed as cars, on list price and CO2 like any other car, not on the flat van charge (EIM23151). The only exception is transitional: a double-cab pickup the employer bought, leased or ordered before 6 April 2025 can keep the old van treatment until it is disposed of, the lease ends, or 5 April 2029, whichever is first. A pickup provided to you now will normally be a company car. For a genuine van, the 2026/27 flat van benefit charge is £4,170, plus £798 if the employer pays for private fuel (HMRC 2026/27 van and fuel charges).
Why EV company cars exploded 2020-2025
Key drivers:
- Super-low BIK on pure EVs (2% from 2022/23 to 2024/25, 3% in 2025/26, 4% in 2026/27, against 17% to 37% for a petrol car)
- Salary sacrifice schemes combining EV lease with gross-pay reduction → stacking income tax and NI savings (28-42%) ON TOP of the low BIK
- Employer NI saving on sacrificed salary (15% from April 2025) often passed back as a cheaper monthly price
Worked example: a higher-rate employee earning well above £50,270 sacrifices £600 a month of gross pay for a £45,000 EV. The sacrifice saves 40% Income Tax and 2% employee NI, so it costs £600 × 58% = £348 of take-home pay; the 4% BIK then adds £45,000 × 4% × 40% ÷ 12 = £60 of tax a month, for a net cost of about £408 a month. Lease price, term and any employer NI pass-back vary by scheme (HMRC, Salary sacrifice and the effects on PAYE).
Fuel benefit — separate charge
If your employer pays for personal petrol / diesel fuel (not just business travel), a separate fuel benefit charge applies:
Annual fuel benefit = (Fuel benefit multiplier) × (BIK%)
2026/27 multiplier: £29,200 (uprated for 2026/27 per gov.uk publication “Increase to van benefit charge and fuel benefit charges for cars and vans”).
Same BIK% as the car applies. For the 31% Golf above, the fuel benefit is £29,200 × 31% = £9,052, which costs a higher-rate driver £9,052 × 40% = £3,620.80 a year whatever the private mileage. Compare that with what your private fuel would cost you; unless private mileage is high, paying for your own fuel is usually cheaper.
No fuel benefit exists for pure electric — electricity provided by employer is exempt from separate BIK.
Common pitfalls
Treating the P11D list price as “what the car cost”
HMRC uses the official list price INCLUDING VAT and optional accessories supplied with the car (whatever they cost), plus accessories added later that cost £100 or more (ITEPA 2003 s.126). Dealer discounts don’t reduce it. A £50,000 car “on the road price” with a £3,000 discount still has the £50,000 P11D value.
Ignoring the diesel surcharge pre-RDE2
A diesel not certified to RDE2 pays the BIK% + 4 percentage points. A non-RDE2 diesel at 150 g/km is not on 36% — it is 36% + 4% = 40%, which the 37% cap pulls back to 37%. The supplement is set by RDE2 certification, not by registration date, and it never applies to diesel hybrids.
Thinking BIK reduces pro-rata if you only drive it evenings
The BIK charge is for the availability of the car for private use, not actual usage. Having the keys on a Monday-Friday basis with weekend use = full BIK. Only if the employer records that the car was made unavailable for a period (keys handed back, 30+ days) can the charge be reduced proportionally.
Expecting company cars to “save money” for the employee
Unless your employer is paying for the entire vehicle as a perk with no salary adjustment, a company car usually costs you MORE in tax than taking the cash equivalent and running your own car — except for EVs.
Tax code impact
BIK charges are usually collected through PAYE by adjusting your tax code. A £1,800 BIK means HMRC reduces your PA by £1,800 — new code 1077L instead of 1257L — and tax comes out of your payslip at normal rates. Alternatively, some employers opt for “payrolling” BIK (showing it as extra taxable pay on each payslip), which is simpler but slightly changes the cash flow.
Related
- Salary calculator — Benefits in Kind toggle (under More options) adds BIK to your taxable income
- Salary sacrifice explained — how EV schemes work and when they make sense
- UK tax-free allowances 2026/27 — the PA your BIK adjustment reduces
Frequently asked questions
What is the company car BIK rate for electric cars in 2026/27?
Pure electric (zero-emission) company cars are taxed at 4% Benefit-in-Kind for 2026/27, up from 3% in 2025/26. The roadmap rises to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30 - still far below petrol and diesel cars, which run from 17% at 51 g/km up to the 37% cap.
How is company car BIK calculated in 2026/27?
Annual BIK charge = P11D list price × BIK percentage × your marginal Income Tax rate. The P11D price is the manufacturer's list price (not what was actually paid), the BIK% comes from HMRC's CO2/fuel-type tables, and the marginal rate is 20%, 40% or 45%. So a £45,000 EV at 4% BIK on a 40% taxpayer = £45,000 × 4% × 40% = £720/year of extra Income Tax.
How much company car tax will I pay on a Tesla Model 3 in 2026/27?
A Tesla Model 3 Long Range with a P11D price around £52,000 at 4% BIK costs a 40% (higher-rate) driver £52,000 × 4% × 40% = £832/year, or about £69/month deducted via PAYE. A 20% basic-rate driver pays half that. Compare with a £45,000 BMW 330i petrol (around 150 g/km CO2) at 36% BIK: £45,000 × 36% × 40% = £6,480/year - roughly 8× the EV cost.
Do hybrid (PHEV) company cars still get a low BIK rate?
For 2026/27, a plug-in hybrid emitting 1-50 g/km is taxed on its electric-only range: 130+ miles = 4%, 70-129 miles = 7%, 40-69 miles = 10%, 30-39 miles = 14%, under 30 miles = 16%. From April 2028 the range bands disappear - every car in the 1-50 g/km band moves to a single 18% (rising to 19% in 2029/30), which removes the long-range PHEV advantage entirely.
Is salary sacrifice for an EV worth it in 2026/27?
Often, for higher-rate taxpayers. You sacrifice gross salary and pay 4% BIK on the car instead (for cars up to 75 g/km the normal BIK charge applies, not the salary given up). The saving is Income Tax plus employee National Insurance on the sacrificed pay: 40% + 2% = 42% on pay above £50,270, and 20% + 8% = 28% for a basic-rate driver whose sacrifice sits below it. The BIK tax then comes back off that saving, and BIK rises through 2029/30 - compare the net cost with leasing the car personally at each renewal.
What is the diesel surcharge on company car BIK?
A diesel car that is not certified to the RDE2 (Real Driving Emissions Step 2) standard pays an extra 4 percentage points on top of the CO2-based BIK percentage, still capped at 37%. The test is certification, not registration date. When the rule started in April 2018 HMRC expected few, if any, cars to meet RDE2 in 2018/19, so do not assume a 2018-2020 diesel is exempt: check the certificate of conformity. Petrol cars and diesel hybrids (not propelled solely by diesel, ITEPA 2003 s.141) never get the supplement.
How does company car tax show up on my payslip?
HMRC usually collects BIK by reducing your tax code - for example, a £1,800 BIK shifts your code from 1257L to 1077L, removing £1,800 of Personal Allowance so your normal PAYE calculation pulls extra tax each month. Some employers instead 'payroll' the BIK (showing it as extra taxable pay each month directly), which keeps your tax code clean but produces the same overall tax bill.