Your car and tax rate
HMRC only lets the first £5,000 reduce the taxable list price.
Estimated annual tax on the car benefit
£0
Monthly equivalent: £0
What this means
A low BIK percentage can still produce a meaningful tax cost once the list price is high. The fuel benefit is the big trap: if private fuel is provided and not fully reimbursed, it can add a surprisingly large tax bill.
Worked examples — see the math on real numbers
How company car Benefit in Kind (BIK) tax works for petrol/diesel vs electric vehicles in 2026/27.
Nathan — petrol BMW 3 Series, higher-rate driver
| List price (P11D value) | £45,000 |
| BIK rate for petrol (mid CO2) | 32% |
| Taxable BIK | £45,000 × 32% = £14,400 |
| Driver income tax band | 40% |
The math:
- Annual BIK tax: £14,400 × 40% = £5,760
- Equivalent to £480/month deducted via PAYE
- Plus employer NI of 15% × £14,400 = £1,987 (paid by employer)
- Plus fuel benefit if employer pays fuel: separately calculated and significant
Result: Nathan's "free" company car costs him £5,760/year in BIK tax — equivalent to a £9,600 pre-tax salary increase if he bought the car himself. For most drivers, a car allowance + private purchase beats company car economics on petrol/diesel.
Olivia — Tesla Model Y EV, same higher-rate band
| List price (P11D value) | £50,000 |
| BIK rate for EVs 2026/27 | 4% (rising 1% per year) |
| Taxable BIK | £50,000 × 4% = £2,000 |
| Driver income tax band | 40% |
The math:
- Annual BIK tax: £2,000 × 40% = £800
- Equivalent to £67/month
- EV charging at home: claim 9p/mile per HMRC reimbursement rate, tax-free
- Salary sacrifice EV schemes amplify this: full pre-tax + NI saving
Result: Olivia pays £800/year for her £50,000 EV — about 7× less than Nathan's petrol equivalent. EV salary sacrifice is currently the most tax-efficient form of company vehicle. The 4% BIK rate is scheduled to rise 1% per year, so the gap will narrow over the late 2020s.
Figures use 2026/27 UK tax-year rates and thresholds. Always verify against your specific payslip or tax statement before acting.
Editorial accountability
Open Trust Centre →
How UK Tax Drag holds itself to account
Every page is reviewed against the editorial standards, written from primary sources, sourced openly, and corrected publicly. No affiliate revenue. No sponsored content. No paid placements.