Company Car Tax 2026/27: EV 4% vs Petrol 30%+ BIK
UK company car BIK tax 2026/27 - exactly what you pay on an EV (4%) vs petrol/diesel (30%+) vs PHEV (5-19%). Worked monthly cost for higher-rate drivers, CO2 bands and P11D formula.
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 car this can cost higher-rate drivers £4,000-£10,000/year in extra tax; 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 extras count if they cost £100+ and are fitted before delivery.
- 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 manufacturer’s data. Post-April 2026 the system tightened — from April 2028 hybrids with CO2 between 1-50g/km have a single fixed BIK% (likely mid-teens) regardless of electric range, closing the pre-2028 advantage for long-range PHEVs.
For 2026/27, PHEV rates sit in the 5% – 19% band depending on electric range:
- Range 130+ miles electric: 5%
- Range 70-129 miles: 8%
- Range 40-69 miles: 12%
- Range 30-39 miles: 14%
- Range under 30 miles: 17%
Petrol and diesel cars
Based on CO2 emissions (g/km):
| CO2 (g/km) | BIK % (petrol) | BIK % (diesel, non-RDE2) |
|---|---|---|
| 50 | 15 | 19 |
| 75 | 19 | 23 |
| 100 | 23 | 27 |
| 125 | 27 | 31 |
| 150 | 31 | 35 |
| 170+ | 37 (cap) | 37 (cap) |
Most diesel cars registered after September 2018 meet the “RDE2” clean emissions standard and pay the petrol rate (no +4% diesel surcharge).
Rates nominally rise 1% per year for 2027/28 and 2028/29 across all non-EV categories, cap at 37%.
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): 27%
- Notional BIK income: £30,000 × 27% = £8,100
Tax cost:
- Higher rate (40%): £8,100 × 40% = £3,240/year (£270/month)
Ford Ranger pickup (commercial vehicle)
Pickups and commercial vehicles with a separate passenger compartment can qualify for the flat van BIK rather than car BIK. Flat van BIK for 2026/27: £3,960 + £757 for fuel if applicable. Significantly cheaper than car BIK for most lifestyles — but HMRC has been tightening the commercial-vehicle definition post-2023 court cases.
Why EV company cars exploded 2020-2025
Key drivers:
- Super-low BIK on pure EVs (2% from 2022 to 2024, 3% in 2025/26, 4% in 2026/27 — compared to 27%+ for equivalent ICE)
- 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
Net result: a £600/month gross lease on a £45,000 EV costs a higher-rate employee roughly £350-£400/month effective after tax savings and BIK cost.
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: check current gov.uk rate — typically £27,800 (2025/26 was £27,800; uprates modestly for 2026/27).
Same BIK% as the car applies. For most drivers it’s cheaper to pay for your own private fuel than accept the fuel benefit — running the numbers usually shows the break-even at around 8,000+ private miles/year.
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 any optional extras worth £100+. 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
Diesel cars registered before September 2018 that don’t meet RDE2 pay the BIK% + 4%. A 2017 diesel at 150 g/km isn’t at 35% — it’s at 35% + 4% = 39% (capped at 37%).
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/diesel cars, which sit at 23-37% depending on CO2 emissions.
- 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 at 31% BIK: £45,000 × 31% × 40% = £5,580/year - roughly 7× the EV cost.
- Do hybrid (PHEV) company cars still get a low BIK rate?
- For 2026/27, plug-in hybrids sit at 5-19% BIK depending on the electric-only range (130+ miles = 5%, 70-129 miles = 8%, 40-69 miles = 12%, 30-39 miles = 14%, under 30 miles = 17%). From April 2028, HMRC tightens the system - hybrids in the 1-50 g/km CO2 band get a single fixed BIK% regardless of electric range, closing the long-range PHEV advantage.
- Is salary sacrifice for an EV worth it in 2026/27?
- For most higher-rate taxpayers, yes. You sacrifice gross salary (saving 40% Income Tax + 8% NI on the sacrificed amount) and pay 4% BIK on the car instead. For a typical £55,000 sacrificed over 4 years at higher rate, the net cost works out 30-40% cheaper than a personal PCP on the same vehicle. The break-even is much weaker for basic-rate drivers (20% saving) and worsens as BIK rises through 2029/30 - run your numbers each renewal.
- What is the diesel surcharge on company car BIK?
- Diesel cars registered before September 2018 that don't meet the RDE2 (Real Driving Emissions Step 2) standard pay an extra 4% on top of the CO2-based BIK percentage, capped at 37%. RDE2-compliant diesels (most post-September 2018 models) pay the standard rate. Petrol cars never get the surcharge.
- 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.